By Howard Schneider
WASHINGTON, July 14 (Reuters) - Federal Reserve Chair Jerome Powell has asked the U.S. central bank's inspector general to review the costs involved in the renovation of its historic headquarters in Washington, as Trump administration officials intensify their criticism of how the Fed is being run.
"I have asked the Board's IG to take a fresh look at the project," Powell told Senate Banking Committee Chair Tim Scott and the panel's top Democrat, Elizabeth Warren, in a letter dated Monday and viewed by Reuters.
The letter, first reported by Politico, responded to concerns raised by the Trump administration and Republican lawmakers about the renovation. The letter said that some features that had drawn criticism -- including VIP elevators or dining rooms -- had never been in the project's scope, and others, including new water features, had been eliminated. Changes to the original design were not substantial and "none of them added cost to the project," Powell wrote.
The request to Fed Inspector General Michael Horowitz, first reported by Axios, was made over the weekend, according to a source familiar with the matter.
It follows a letter to Powell last week from the director of the Office of Management and Budget, Russell Vought, who wrote that President Donald Trump was "extremely troubled" by cost overruns in the $2.5 billion project. "The Chairman looks forward to receiving additional information about the costly renovations at the Fed's headquarters," a spokesperson for Scott said in response to the letter, adding that the letter was consistent with improving transparency.
The Senate Banking committee oversees the Fed.
In material posted to its website on Friday and summarized in Powell's letter to the senators, the Fed said the cost overruns were driven by factors including higher-than-estimated materials and labor costs, as well as toxic contamination in the soil that came to light during what is a complete rehabilitation of the nearly 100-year-old Marriner S. Eccles building and a neighboring property on Constitution Avenue in the nation's capital.
"We respect the critical importance of the constitutionally-derived congressional oversight of our activities, and we are committed to working collaboratively and cooperatively with you," Powell wrote to the senators.
OMB has no oversight over the Fed, which funds its own operations separately from the appropriations process in Congress. The Federal Reserve Act also gives the central bank's seven-member Board of Governors control over its building and related projects, with oversight by Congress and the Fed's independent IG, which has been reviewing the renovations throughout the process. But Vought's criticism marked an escalation by the Trump administration against Powell and the Fed more broadly. Trump has been angry over the central bank's refusal to cut interest rates on his timetable. Fed officials have resisted cutting rates until there is clarity on whether Trump's tariffs on U.S. trading partners reignite inflation. Trump has said Powell should resign, but the president does not have the power to fire him over a monetary policy dispute.
Powell, who was nominated by Trump in late 2017 to lead the Fed and then nominated for a second term by Democratic President Joe Biden four years later, has said he intends to serve out his term as Fed chief, which ends on May 15. A list of "frequently asked questions" about the project, posted by the Fed on Friday, included several raised by Vought and also addressed by Powell during a recent hearing in Congress, when the Fed chief clarified, for example, that contrary to some press reports there were no private elevators being installed to carry Fed officials to a private dining room.
The Eccles building, the Fed's main headquarters, was built during the Depression, during President Franklin Delano Roosevelt's administration.
The neighboring site at 1951 Constitution Avenue, which dates to the administration of Roosevelt's predecessor, Herbert Hoover, had been used by a number of agencies before being turned over to the Fed in 2018 by the first Trump administration "enabling them to renovate this historic property," Trump's General Services Administration said in a press release at the time. "This transfer will put a vacant building back in productive use, allow the Federal Reserve Board to consolidate several leases and result in savings for taxpayers," it said.