President Donald Trump’s top economic adviser said Sunday that former Federal Reserve Chair Jerome Powell should give up his seat on the central bank’s board, renewing the administration’s pressure on Powell days after the Fed’s internal watchdog found no grounds for a criminal referral over a costly renovation of its Washington headquarters.
“I think that it’s time for him to move on and to respect the independence of the Fed,” Kevin Hassett, director of the White House National Economic Council, said on Fox News’ “Sunday Morning Futures.”
Hassett called it “completely unprecedented” for a Fed chair to stay on after his leadership term ends, comparing it to a company’s former CEO keeping an office next to his successor, Fox Business reported. Departing Fed chairs have traditionally left the board, Bloomberg noted, but there is at least one exception: Marriner Eccles remained a governor until July 1951 after stepping down as chair in January 1948, according to the Federal Reserve History website.
Powell’s term as chair ended in May, when Kevin Warsh took over. Powell remains a governor, a separate post whose term lasts until Jan. 31, 2028, CNBC reported. He said in April that he would stay “until this investigation is well and truly over, with transparency and finality,” according to CNBC. Powell has also said the threat of criminal inquiries targeting him and the central bank gave him no option but to remain, a stance Trump and members of his administration have condemned, Bloomberg reported.
If Powell left, Trump could fill the vacancy. Fox Business said Powell did not immediately respond to its request for comment.
Watchdog cites management failures
In a report released Sept. 30, the Fed’s inspector general, Michael Horowitz, said his office saw no reasonable basis for referring a possible federal crime to the attorney general. The watchdog also did not identify any “administrative misconduct” tied to the project, Bloomberg reported, but it faulted management and oversight failures that helped drive up costs.
Among its findings, the report said the Fed did not enforce a guaranteed maximum price on the project and relied on a committee process that failed to bring rising costs to senior leaders’ attention, CNBC reported. The Fed projected in 2020 that the work would cost $1.3 billion. By August, the board-approved budget had reached $2.4 billion, including $960 million in added construction costs.
The Fed has attributed part of the increase to inflation. The inspector general agreed that was a factor but noted that some expenses far outpaced the 16% rise in producer prices during the project. Plumbing, heating, ventilation and air conditioning costs, for example, climbed 223%.
Trump responded to the report on social media, saying Powell “should be forced to resign” from the board. Trump said he had asked Attorney General Todd Blanche to review the report.
Justice Department won’t reopen probe
Blanche said Friday that the Justice Department would not restart its criminal investigation of Powell. “We’re not reopening a criminal investigation into him,” Blanche told Bloomberg. He said the department could act if an independent audit the Fed plans turns up evidence of wrongdoing. “If they learn anything that rises to any kind of criminal misconduct, you better believe we’re going to investigate that,” he said.
In March, a federal judge quashed grand jury subpoenas issued in the earlier investigation after concluding they served an improper purpose, CNBC reported. The department later closed the probe rather than appeal. Warsh has said the Fed will bring in an independent auditor and tighten oversight of the project.
What’s next
Hassett’s comments came weeks after Fed policymakers, now led by Warsh, voted 12-0 in September to raise the benchmark interest rate a quarter percentage point to fight stubborn inflation, even though Trump has long pushed for lower borrowing costs. “I disagree with that decision, but we respect that he was doing that for the right reasons,” Hassett said of Warsh, according to Bloomberg.
The open questions now are whether Powell stays on the board until his term ends in January 2028 and what the Fed’s outside audit of the renovation finds.
