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Outside lawyers have reportedly advised the Trump administration that it would probably lose in court if the president tried to fire Federal Reserve Chair Jerome Powell over allegations that he mismanaged the Fed’s headquarters renovation project.
Citing two anonymous sources “familiar with discussions around Powell’s firing,” Politico reported that the ongoing campaign to undermine Powell’s credibility and pressure him to lower interest rates or resign is likely to continue.
Another fear preventing Trump from firing Powell is that yields on government bonds that fund U.S. debt might climb, as they did when Trump announced country-specific “reciprocal tariffs” on dozens of countries in April, sources told Politico.
Powell responded in writing Thursday to allegations raised by several Trump administration officials that the Fed has mismanaged a $2.5 billion renovation of its Washington, D.C., headquarters and that Powell lied to Congress about it.
The Fed had previously detailed reasons for the rising costs of the headquarters renovation, and rebutted suggestions that it had broken the law or that Powell lied to Congress when he said it did not include specific features like a VIP dining room, special elevators, new water features, beehives or rooftop terrace gardens.
Federal Reserve headquarters renovation project
Marriner S. Eccles Building and Federal Reserve Board-East Building. Source: National Capital Planning Commission (NCPC).
The latest response, from Powell himself, was addressed to Trump administration official Russell Vought, who, on July 10, posed 11 questions to Powell about the allegedly “ostentatious” renovation project and gave him seven business days to answer.
Vought suggested that if the renovation project did not include luxurious features as claimed by The New York Post and other conservative media outlets, the Fed may have violated the National Capital Planning Act, “which requires that projects like the Fed headquarters renovation be approved by the National Capital Planning Commission.”
In his response to Vought, Powell reiterated the Fed’s position that it “voluntarily submitted designs for the project and sought and received NCPC approval for designs in both 2020 and 2021.”
Since then, he said, the Fed “has made a small number of design changes to scale back or eliminate certain elements” to “simplify construction and reduce the likelihood of further delays and cost increases.”
Those changes to the project were not substantial enough to warrant further review, Powell said.
“As explained on the board’s public website, we take seriously the responsibility to be good stewards of public resources as we fulfill the duties given to us by Congress on behalf of the American people,” Powell wrote to Vought.
The Federal Reserve’s independent Inspector General “has had full access to project information on costs, contracts, schedules, and expenditures” and conducted an audit in 2021 to assess the Fed’s process “for planning and managing multiple renovation projects,” Powell said.
“I have also asked the IG [Inspector General] to conduct a fresh review of the project,” Powell said.
Pressure campaign continues
Vought told reporters Thursday that he plans to visit the project in person next week, which is “now approaching the actual cost, adjusted for today’s dollars, of the Palace of Versailles,” he claimed — echoing language in an April 27 New York Post story that detailed lavish-sounding features of the project.
“They either misled Congress, or they need to go back to the National Capital Planning Commission and have a reassessment of the project,” Vought said.
Powell has been under pressure by Trump and his allies to lower interest rates or resign, but he has made it clear he intends to stay until his term as board chair expires in May 2026. His term as a Fed governor ends Jan. 31, 2028.
The Supreme Court reiterated in a May 22 order that Trump — who appointed Powell as Fed chair in 2017 — can’t remove him without cause.
Allegations that the Fed has mismanaged the renovation of its Washington, D.C., headquarters appear to be aimed at providing a mechanism for unseating Powell as Fed chair before then.
On July 9, Trump named three allies to the NCPC — White House Secretary William Scharf, White House Deputy Chief of Staff Michael James Blair, and Vought aide Stuart Levenbach.
Vought, who heads both the White House Office of Management and Budget (OMB) and the Consumer Financial Protection Bureau (CFPB), suggested in his July 10 letter that either Powell misled Congress, or the Fed had changed the project’s plans without obtaining the required approvals.
Another Trump administration official, Federal Housing Finance Agency Director Bill Pulte, claims Powell lied to lawmakers and has demanded a Congressional investigation.
“Jerome Powell’s $2.5B Building Renovation Scandal stinks to high heaven, and he lied when asked about the specifics before Congress,” Pulte said in a July 2 statement bearing the FHFA’s letterhead. “This is nothing short of malfeasance and is worthy of [dismissal] ‘for cause.’”
At least two Republican lawmakers have taken up Pulte’s cause. Wyoming Republican Sen. Cynthia Lummis posted a cartoon meme on X Wednesday depicting Powell floating in a fountain in front of the Fed headquarters.
“Jay Powell must go,” Lummis wrote.
Jay Powell must go. pic.twitter.com/KJyrXcGWtd
— Senator Cynthia Lummis (@SenLummis) July 16, 2025
Florida Rep. Anna Paulina Luna, announced on the social media platform X Thursday that she was “criminally referring Jerome Powell to the DOJ to investigate perjury regarding his crazy $2.5BN building.”
But Powell has the support of several members of the Senate Banking Committee, which oversees the Fed, Reuters reported.
“I just think long term, it really is best for the economic conditions in our country that the markets understand that the Fed really is independent,” Republican Sen. Mike Rounds of South Dakota said Thursday.
The Wall Street Journal reported Thursday that Pulte’s attacks on Powell “have irritated some senior administration officials,” who “view it as inappropriate for the FHFA director to weigh in and worry his loose approach could undermine the administration’s efforts to pressure the Fed or intensify the risk of market turmoil.”
White House Press Secretary Karoline Leavitt provided the Journal with a statement saying “the entire Trump administration are appreciative of Mr. Pulte’s efforts, and everyone is working together to implement the president’s policies.”
The Wall Street Journal‘s editorial board also weighed in Thursday, calling Powell’s supposed mismanagement of cost overruns of the headquarters renovation “a silly pretext” for firing him.
Not only would firing Powell be a “blunder,” the Journal opined, but the White House’s pressure campaign is “making life difficult” for whoever serves as the Fed’s next chair.
The Fed doesn’t have direct control over long-term rates on bonds and mortgage-backed securities (MBS), and markets reacted badly to reports that Trump had drafted a letter firing Powell, the Journal noted.
When policymakers at the central bank cut rates by a full percentage point at the Fed’s final three meetings of 2024, mortgage rates moved up by about the same amount, as incoming economic data suggested inflation was on the rise again.
“It’s in everyone’s interests, including Mr. Trump’s, that markets perceive that person as a serious policy-maker and not an Oval Office pushover,” the Journal’s editorial board warned. “Some uncharacteristic restraint from Mr. Trump now makes it easier for his preferred candidate to maneuver later.”
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