A scathing watchdog report blasted the Federal Reserve on Wednesday for severely mismanaging its ‘Palace of Versailles” HQ renovation, but officially cleared former Fed Chair Jerome Powell of any criminal wrongdoing.
The bloated project effectively put taxpayers on the hook for $2.5 billion in a botched overhaul that President Donald Trump called “disgraceful.”
The blistering 120-page Inspector General review — ordered directly after The Post’s exclusive last year that the overhaul was going ahead despite massive losses — slammed Fed bosses for a pay-as-you-go approach to the eye-wateringly expensive project, which saw costs balloon from an initial $921 million.
The report, while not binding on DOJ prosecutors, also cleared Powell of criminal wrongdoing with investigators concluding they found “no reasonable grounds to believe that a violation of federal criminal law had occurred.”
Nevertheless, President Trump on Wednesday said he has asked Attorney General Todd Blanche to “study the report” in a TruthSocial post.
“Powell should be forced to resign from the Board,” Trump said. “He can’t manage a Building, and he certainly shouldn’t be allowed to manage his High Interest Rate Policy.”
Major blunders fueled the overrun, according to the report. Mid-project, the Fed abruptly scrapped open workspaces in favor of private offices, halting design progress for a staggering 21 months, the findings showed.
Mechanical and plumbing costs spiked by nearly $500 million. But Fed bureaucrats rubber-stamped these massive payouts anyway, even when contractors failed to secure the required three competitive bids.
The probe also lashed out at the Fed’s leadership for failing to obtain a basic cost estimate until January 2026—three-and-a-half years after construction began.
By that point, the board had already agreed to splash out some $2 billion for the lavish project.
The Fed normally sends its extra profits to the Treasury to help fund the government, but money spent on this project reduces those payouts and leaves American workers to make up the difference.
The report said bluntly the central bank had “not successfully managed and executed” the work.
“This failure to establish an expected total project cost and spending limit allowed a pay-as-you-go approach to develop,” the Inspector General added. “Without a cost ceiling, senior officials and oversight entities lacked a true measure of this critical performance metric.”
The OIG report confirms the initial draft for the splashy renovations included marble interiors and a rooftop garden terrace, but claimed they did not “significantly contribute” to the higher price tag.
Other luxury water features were axed in June of last year—just two months after The Post’s exclusive—because of “external stakeholders, such as Congress and the media, raising concerns about the design,” the report noted.
Some of President Trump’s inner circle had floated trying to fire former Chair Powell after accusing him of lying to Congress in his testimony about the cost of the work, denying the splashy plans ever existed.
The DOJ tried to probe the former chair over the alleged false statement made during his appearance, but judges quashed the subpoenas against him.
“Inflation does not change the Fed’s responsibility to manage its resources prudently and be accountable to Congress,” said Senator Tim Scott (R-SC), the chair of the Senate Banking Committee.
Senator Scott’s comments appear to be a thinly veiled reference to how Fed pen-pushers blamed only the rising cost of materials during the coronavirus pandemic for the spiralling overruns.
The Post has sought comment from the White House and the Federal Reserve.
