Fed Chair Jerome Powell grilled over ‘lavish’ headquarters renovations

Federal Reserve Chair Jerome Powell on Wednesday pushed back against reports the central bank was spending money excessively on renovations, saying that the almost 90-year-old headquarters “was not really safe,” while acknowledging cost overruns.

“The media reports … are misleading and inaccurate in many, many respects,” Powell said in an appearance before the Senate Banking Committee.

Powell spoke as part of testimony for the central bank’s semi-annual report on monetary policy to Congress.

Senate Republican Tim Scott criticized the Fed over the renovations, saying at the hearing: “During this time of hardship, the Fed has spent billions on lavish renovations to its D.C. offices.”

Scott cited what he said were a series of luxury upgrades, coming at a time where the Fed has been in the unusual position of losing money due to its efforts to contain inflation pressures with high short-term interest rates.

“We can all agree that updating aging infrastructure is a legitimate need, but when senior citizens can barely afford Formica countertops, it sends the wrong message to spend public money on luxury upgrades that feel more like they belong in the Palace of Versailles than a public institution,” Scott said.

Powell pushed back on the criticism. “We do take seriously our responsibility as stewards of the public’s money,” he said as he defended the need to upgrade the buildings the central bank counts as its headquarters for the Board of Governors. The Fed’s 12 regional banks also have their own home bases.

Powell said the Fed’s Eccles building, constructed between 1935 and 1937, “really needed a serious renovation,” saying that among the building’s issues, “it was not really safe and it was not waterproof.”

He said reports of huge luxury upgrades were wrong and went on to detail what the Fed was doing to modernize the buildings. “There are no new water features, there’s no beehives, and there’s no roof terrace gardens.” The Fed is also upgrading a building nearby.

But Powell acknowledged that “the cost overruns are what they are.”

In a statement on its website, the Fed said the renovations “will consolidate most Board staff into one campus; reduce off-site leases; and provide a modern, efficient workspace for employees to conduct their work on behalf of the American people.”

Earlier this year, a report from the Federal Reserve’s Inspector General, an in-house watchdog, said that as of February the cost of the renovations was expected to stand at $2.4 billion, up from $1.9 billion two years ago.

The rise in costs comes as the Fed has faced notable and unprecedented losses due to how it manages monetary policy.

The Fed is self-funded and earns income from bonds it owns and services it provides. The Fed has almost always been profitable but has not been in the last few years due to high interest rate costs aimed at setting rates to lower inflation pressures.

The Fed deals with losses via accounting measures and has repeatedly noted the red ink does not impede its work, but those losses now have some elected officials targeting the system that led to the losses.