White House escalates pressure campaign on Federal Reserve by targeting its headquarters renovation

Federal Reserve Chairman Jerome Powell. (AFP)

WASHINGTON: The White House is trying to turn the Federal Reserve into a poster child for wasteful spending, criticizing an expensive renovation at the central bank’s headquarters as President Donald Trump pursues an extraordinary pressure campaign to lower interest rates.

The latest step came Thursday when Russ Vought, Trump’s top budget adviser, sent a letter to Federal Reserve Chairman Jerome Powell saying the president is “extremely troubled” that plans may have violated government building rules with an “ostentatious overhaul.”

Trump also named two close aides — James Blair, a deputy chief of staff, and Will Scharf, the staff secretary who furnishes the president with executive orders for his signature — to the National Capital Planning Commission, an obscure panel that could provide another avenue to increase scrutiny.

Blair said he would be “requesting a review of all previous and current building plans” and suggested that Powell wasn’t honest while testifying to Congress about the renovations last month.

If Powell isn’t truthful, Blair wrote on social media, “how else is the American Public to maintain confidence that its monetary policy manager is acting in their interests?”

Taken together, the latest steps amount to an escalating effort to dislodge Powell from his position as chairman before his term ends next May. It’s an unprecedented attempt to reshape the Federal Reserve’s traditional role as an autonomous arbiter of US monetary policy.

If successful, Trump will have expanded his influence to yet another corner of American government that was once seen as beyond the reach of political pressure, but he will have also jeopardized the independence that has made the central bank a foundational player in the US economy.

On Wednesday, Trump said Powell “should resign immediately” so “we should get somebody in there that’s going to lower interest rates.” He suggested that he’d rather have Scott Bessent, his Treasury secretary, as a replacement.

Powell has resisted Trump’s pressure, largely out of concern that Trump’s tariff plans could increase costs for American consumers. If rates are lowered too aggressively, it could lead to a resurgence of inflation.

But Trump insists that inflation is no longer a problem, and a rate cut would help make mortgages, auto loans and other forms of consumer debt cheaper. Trump has also said it would allow the US government to finance its debt more cheaply, a pressing concern as legislation signed by the president is poised to increase the federal deficit by extending tax cuts.

“LOWER THE RATE!!!” Trump wrote on social media on Thursday as he continued a near-daily drumbeat of criticism.

However, there’s no guarantee that financial markets will reduce rates on government debt even if the Fed bows to Trump’s wishes. Such a situation could lead to higher interest costs for consumers — a reminder of how monetary missteps may backfire.

Powell was nominated to the Federal Reserve Board of Governors by President Barack Obama, then made chairman by Trump during his first term. But in his second term, Trump turned Powell — who has sought to avoid politics and refrains from responding directly to the president— into one of his primary antagonists.

Trump has said that he wouldn’t directly oust Powell — “I don’t know why it would be so bad, but I’m not going to fire him,” he said last month. The Supreme Court said in May that it could block such a step.

However, Trump’s allies have found other ways to make Powell uncomfortable.

Bill Pulte, the Trump-appointed director of the Federal Housing Finance Agency, also accused Powell of lying to Congress about the renovations.

“I am asking Congress to investigate Chairman Jerome Powell, his political bias, and his deceptive Senate testimony, which is enough to be removed ‘for cause,’” he said last week. Pulte said the situation “stinks to high heaven.”

Vought, in his own letter, said the called the initial renovation plans featuring rooftop terrace gardens, VIP dining rooms and premium marble an “ostentatious overhaul.” Vought also suggested that Powell misled Congress by saying the headquarters had never had a serious renovation, saying that an update to its roof and building systems that was completed in 2003 counts as a “comprehensive” renovation.

Fed officials did not respond to an email seeking a response to the letter. Powell said in Senate testimony last month that some of the elements in the 2021 plan such as the dining rooms and rooftop terraces are no longer part of the project for the 90-year-old Marriner S. Eccles Building.

The debate over the renovation could set up a legal battle between the White House and the Fed, which under the law is allowed to use its own judgment to establish “suitable” and “adequate” quarters for its operations.

Sung Won Sohn, a finance and economics professor at Loyola-Marymount University, said “it’s good that the central bank budget is coming under review and scrutiny.”

However, he warned against using such issues to challenge the Fed’s independence. If that’s compromised, he said, it’s “bad for the economy, that’s bad for inflation expectations and therefore long term inflation.” ___

Associated Press writer Fatima Hussein contributed to this report.