Powell Gets Served

Department Of Justice Opens Investigation Of Fed Building Renovations

The Department of Justice has opened an investigation into the Federal Reserve’s renovations of its office buildings, a project whose costs have risen substantially, and has served the Federal Reserve with subpoenas about those cost overruns.

Given the unprecedented nature of the action, we should not be surprised that Chairman Jerome Powell made the equally unprecedented move of releasing a video statement Sunday night about the subpoenas.

On Friday, the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to my testimony before the Senate Banking Committee last June. That testimony concerned in part a multi-year project to renovate historic Federal Reserve office buildings.

The renovation project has been the topic of White House criticism since President Trump toured the renovation site with Powell last summer.

Top White House officials have accused Powell of mismanagement of a previously planned renovation of the Federal Reserve building. Over the summer, they suggested he misled Congress about the renovation of the central bank’s headquarters.

Last August President Trump called Powell “grossly incompetent” on Truth Social over the renovation projects rising costs.

For his part, Powell seems convinced that the subpoenas have nothing to do with the construction project (because why would a grand jury subpoena be actually about the subject matter detailed in the subpoena?) but are instead a pressure tactic to coerce the Fed to bend to Trump’s will on interest rates.

This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress's oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation project. Those are pretexts. The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.

Powell fails to offer up any evidence to substantiate this, however. In his statement he also ignores an obvious aspect to his claim: for it to be true, there has to be nothing untoward or improper in the renovation project or its expenditures.

Powell is asking people to believe that everything is fine on a billion-dollar project that is way over-budget, with the costs still rising.

How does a $1.9 billion renovation project grow to over $2.5 billion? While Powell's defenders point to the “challenges” of building on swampy Tidal Basin land, any construction contractor bidding on the project knew the conditions of the Tidal Basin when preparing their estimates. Given the age of the buildings, that there would be asbestos remediation and lead plumbing involved should also have been known ahead of time. Contractors are supposed to account for such exigencies in their initial bids. The Fed's contractors apparently did not.

Why wouldn’t the Department of Justice investigate a construction project which is that badly managed?

With the levels of fraud being revealed elsewhere within government, why should we expect the Federal Reserve to be above suspicion? Are we supposed to pretend that the allegations of mortgage fraud leveled against Fed Governor Lisa Cook last summer were an isolated case?

Unsurprisingly, President Trump denied any knowledge or involvement with the subpoenas in an interview on Sunday.

Trump told NBC News on Sunday that the Justice Department subpoenas have nothing to do with interest rates.

“No. I wouldn’t even think of doing it that way. What should pressure him is the fact that rates are far too high. That’s the only pressure he’s got,” Trump said.

“He’s hurt a lot of people,” he added. “I think the public is pressuring him.”

Could Trump still be maliciously targeting the Federal Reserve for political reasons? Of course he could. Donald Trump does not pull punches and is not afraid to use every weapon at his disposal. Whether that speaks well or ill of the man people will have to decide for themselves.

However, Powell is mistaken to suggest that there is nothing but political animus behind the DoJ investigation. He is mistaken to ignore the reality that the DoJ has over 600 million reasons to investigate the renovation project. He is mistaken to ignore the reality that cost overruns are not okay, especially $600 million and counting of cost overruns.

The Trump Administration is gunning for Jerome Powell. Powell had better pray he has not made himself a target for Trump to shoot.