An obscure report detailing skyrocketing renovation costs at the Federal Reserve's headquarters earlier this year has unexpectedly evolved into a strategic weapon for Donald Trump's escalating campaign against Chair Jerome Powell – potentially providing grounds for termination. Though the former president lacks clear legal authority to dismiss Powell over monetary policy disagreements, his advisors have seized upon the $2.5 billion construction project as an emblem of government profligacy, aiming to erode public confidence in Powell's leadership.
Trump publicly dismissed imminent dismissal prospects Wednesday as "highly unlikely" absent fraud allegations. Yet the White House's fixation on marble finishes and budget overruns stems not from legitimate oversight authority but from a tactical playbook: undermining Powell's credibility while constructing potential legal justification for removal. Previous presidential musings about firing Powell during Trump's first term and again this spring were abandoned after warnings of market turmoil and legal defeats.
This impasse has galvanized Trump allies to weaponize the long-running renovation project, hoping to either shame Powell into resignation or establish judicial precedent for removal. Federal Reserve law permits dismissing policymakers only for "cause" – typically malfeasance or neglect. Legal scholars remain skeptical such grounds exist here, suggesting the real strategy involves political bombardment to force either resignation or policy capitulation on interest rates.
The conflict's true arena isn't the courtroom but public perception. A recent Supreme Court ruling indicated presidential dismissal powers don't extend to Fed officials, making credibility the institution's core vulnerability. Consequently, the central bank now finds itself defending construction management choices – far more tangible to citizens than esoteric rate decisions – rather than monetary policy intricacies.
Demonstrating this shift, a senior White House advisor photoshopped Powell as the extravagance-associated Marie Antoinette Tuesday, captioning it "Let them eat basis points." This followed another Trump appointee amplifying baseless rumors about Powell's resignation last week.
Powell has repeatedly emphasized that shielding the Fed's rate-setting independence constitutes his paramount objective during his remaining ten-month tenure. A politicized central bank would struggle to control inflation or maintain market trust, ultimately elevating long-term borrowing costs. Resigning or accepting dismissal, Powell believes, would betray the institutional independence he's pledged to protect – a stance framed not as personal ambition but as safeguarding future chairs' authority.
Republican voices caution against dismissal, with Senator Thom Tillis warning Wednesday that ousting Powell would be a "colossal error" eroding U.S. credibility and triggering immediate market upheaval. Practical complications also loom: the Fed controls its own facilities, meaning Powell could continue working inside the headquarters pending court rulings or Senate confirmation of a successor – potentially creating an extended institutional standoff.
Historical parallels emerge with Nixon-era pressure on Chair Arthur Burns, where the administration planted false stories about Burns seeking a raise while advocating wage controls during the 1972 election. The current headquarters complex originated in 1937 and expanded in the 1970s before Congress authorized renovations in 2000. The Fed attributes current cost overruns to unexpected asbestos levels, toxic soil contamination, higher groundwater tables, and design modifications required to harmonize with historic architecture.
Two years of visible construction cranes have drawn scrutiny, with Powell testifying last month that extravagant designs allegedly driving costs had been eliminated from plans. The White House budget director subsequently demanded explanations within seven business days for alleged discrepancies in Powell's congressional testimony – coinciding with Trump appointing three advisors to the renovation oversight panel.
Powell countered in a letter to Senate Banking leaders that his prior testimony remained accurate and stressed the Fed's cooperation with planning authorities was voluntary. Underscoring the administration's persistence, one newly appointed Trump advisor renewed demands Wednesday for a public tour of the renovation site. Trump himself expressed bafflement at Powell's association with lavish upgrades, telling reporters: "I considered him rigid and dull, never someone needing a palace."
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