Hassett Urges Powell to Leave the Fed After Renovation Report

Kevin Hassett, chief economic advisor to US President Donald Trump, called on Jerome Powell, former Chair of the Federal Reserve, to leave the central bank's Board of Governors, following an oversight report that revealed deficiencies in managing the renovation project of two Federal Reserve buildings in Washington.

Hassett, who heads the National Economic Council at the White House, said during a "Fox News" interview on Sunday that it was time for Powell to "move on," in response to a question about whether he should resign from the Board of Governors, adding that this would be consistent with respecting the independence of the Federal Reserve.

The Office of Inspector General for the Federal Reserve concluded, in a report issued on September 29, that there were deficiencies in the management of the renovation projects for the "Eccles" and "1951 Constitution Avenue" buildings, but found no basis to believe that criminal misconduct or administrative malfeasance warranting referral had occurred.

The report clarified that the budget for the two projects increased from $921 million in February 2020 to $2.018 billion in the 2024 budget, more than doubling. In contrast, the Federal Reserve currently sets the total approved budget for renovating the two buildings at approximately $2.46 billion.

The Inspector General noted that the Federal Reserve did not effectively manage the "Risk Exposure Construction Manager" contract, repeatedly deviated from certain cost control mechanisms, and failed to take a number of actions that could have mitigated some of the significant cost increases. The office issued seven recommendations, which the Federal Reserve accepted.

Following the release of the report, Trump renewed his call for Powell's resignation from the Board of Governors, after years of disagreement between them regarding the path of interest rates and the central bank's independence.

In response, the US Department of Justice stated that it would not reopen the criminal investigation into Powell based on current findings, after the Inspector General concluded there was no basis for criminal prosecution. Attorney General Todd Blanche said that the emergence of new evidence in the future could open the door to reviewing the case again.

The renovation project is also scheduled to undergo independent scrutiny, after Federal Reserve Chair Kevin Warsh announced his intention to hire an external party to review the project's costs and compliance with procedures.

Powell continues his membership on the Federal Reserve Board of Governors after his term as Chair ended last May, while his term as a member extends until 2028. He had said in his final press conference as Chair that his staying on the Board was linked to his desire to ensure full transparency regarding investigations and pressures related to the renovation project.

In the context of monetary policy, Hassett said he disagreed with the Federal Reserve's decision to raise interest rates last month, but respected the decision made by the bank under Warsh's leadership.

The Federal Reserve raised interest rates by a quarter percentage point to a range of 3.75%-4.00% on September 16, marking the first increase in three years and the first rate hike under Warsh's chairmanship. The decision was unanimous amid continued inflationary pressures.

Trump criticized the decision and demanded lowering interest rates to 1% or less, but affirmed his confidence in Warsh, whom he nominated as Powell's successor.