Trump’s OMB director says Powell ‘has grossly mismanaged’ Fed as White House pressure builds

White House budget director Russell Vought said in a social media post that Jerome Powell “has grossly mismanaged the Fed” as he published a letter sent to the central bank chairman raising concerns about renovations of the institution’s Washington, D.C., offices.

“The president is extremely troubled by your management of the Federal Reserve system,” wrote Vought, director of the Office of Management and Budget. “Instead of attempting to right the Fed’s fiscal ship, you have plowed ahead with an ostentatious overhaul of your Washington DC headquarters.”

Powell’s testimony about the renovations before a Senate committee last month, according to Vought, raised questions about the project’s compliance. Vought cited what he called cost overruns of more than $700 million, plans for rooftop terrace gardens, VIP private dining rooms and elevators, water features, and marble.

On Friday, Vought told reporters the renovations are on par with “the Palace of Versailles” and said “it probably would qualify as one of the eighth wonders of the ancient world if you were able to go back that far.”

The letter from Vought is the latest in a series of new pressure points on Powell, who has become the target of President Trump’s ire for months now. The president has called repeatedly for the chairman to lower interest rates.

Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments

In the past two weeks, Trump has said twice that Powell should resign immediately. On Tuesday, he said in response to a reporter’s question that “it’s OK with me” if Congress investigates the Fed chairman.

The reporter had asked Trump about accusations made by some Republican lawmakers that Powell had misled Congress about renovations at the Fed’s headquarters building.

“I think he is terrible,” Trump added.

The comments that Powell made about the headquarters came as he testified before Senate lawmakers on June 25.

Republican senators asked him about media reports that described the expenses and features of the Fed renovation project and cited allegations that the cost of the renovation has increased by more than 30% to $2.5 billion.

Office of Management and Budget Director Russ Vought.

Citing media reports, GOP senators said plans showed the renovated buildings will include rooftop garden terraces, ornate water features, new elevators that deliver board members directly to their VIP dining suite, and the use of white marble with a private art collection in the basement.

Powell called the media reports quoted by senators “misleading and inaccurate,” saying that there was no VIP dining room nor new marble. Powell stressed that there are no new water features, no beehives, no rooftop terrace gardens, and no special elevators.

“So all the sort of inflammatory things that the media said are either not in the current plan or just inaccurate,” Powell said.

In his letter to Powell, Vought said that Powell’s testimony raises serious questions about the project’s compliance with the National Capital Planning Act, which requires that projects like the Fed headquarters be approved by the National Capital Planning Commission (NCPC).

The NCPC approved a plan in 2021, Vought said, but Powell’s testimony “appears to reveal the project is out of compliance with the approved plan.”

Fed Chairman Jerome Powell testifying before Senate lawmakers last month.

That, he said, would be a violation of the National Capital Planning Act and require the Fed to halt construction and obtain a new approval from NCPC.

However, the Federal Reserve Act establishing the Fed as the central bank of the US does state that the Fed has jurisdiction over its own buildings.

The central bank shall have the power “to provide for the acquisition by the Board in its own name of such site or building in the District of Columbia as in its judgment alone shall be necessary for the purpose of providing suitable and adequate quarters for the performance of its functions,” according to section 10.3 of the statute.

The law also states that the Fed’s board “may maintain, enlarge, or remodel any building or buildings so acquired or constructed and shall have sole control of such building or buildings and space therein.”

But Vought, in a social media post on X, said Powell’s comments led to a need for increased OMB oversight in conjunction with the NCPC, a group that says on its website that it “represents federal and local constituencies with a stake in planning for the nation’s capital.”

The president appoints three citizens, including the chair, to that commission.

One of those appointees, James Blair, said on X on Thursday, just hours after being sworn in, “Today I expressed my grave concern with the public allegations by others that Federal Reserve Chairman Powell was not honest with the Senate Banking Committee in his late June testimony about design features of the Federal Reserve’s Headquarters Renovation Project.”

Blair is a longtime Trump ally currently serving as Trump’s deputy chief of staff, where he was involved in issues like passing the reconciliation package after a stint as political director of Trump’s 2024 campaign.

Blair added in his posts about Powell that he “shared with my co-commissioners that I would be requesting a review of all previous and current building plans for Fed’s HQ renovation project and will be requesting a site visit to the project immediately.”

The commission’s chair is White House staff secretary Will Scharf, who was previously one of Trump’s personal attorneys. He has gained attention as his current role often involves him handing Trump executive orders to be signed.

Another member of Trump’s administration, Federal Housing Finance Agency director Bill Pulte, has called for Congress to investigate Powell over the statements he made to Senate lawmakers 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,'” Pulte has said in a post on X.

The increased pressure on Powell from the White House comes as the Trump administration is eager for Powell to exit the Fed as it considers its options for replacing the chair and putting its own imprint on the powerful central bank board that helps decide whether interest rates go up or down.

Read more: What experts say about the possibility of additional rate cuts

A top Treasury Department official told Yahoo Finance Wednesday he would like to see Powell step down from the central bank’s Board of Governors after his term as chair ends next May.

“It has traditionally been the case that when a Fed chairman’s term ends, and they’re no longer going to be chairman, that they don’t stay on the Board of Governors,” Deputy Treasury Secretary Michael Faulkender said to Yahoo Finance in an interview.

“I would hope that Chairman Powell follows tradition along those lines.”

Deputy Secretary of the Treasury Michael Faulkender. (Anna Moneymaker/Getty Images) · Anna Moneymaker via Getty Images

A new 14-year Fed board seat opens up with Fed governor Adriana Kugler’s scheduled departure on Jan. 31. The administration is currently discussing who should fill that seat. It also hopes it will have a second seat to fill when Powell’s chairmanship is up next May.

But Powell has not said whether he intends to give that up.

Powell has also been adamant that the president cannot remove him. When asked earlier this year whether the president could fire him, Powell simply said, “Not permitted under the law.”

The only language in law pertaining specifically to the removal of Fed board members can be found in Section 10 of the Federal Reserve Act. The law states that each member of the board shall hold office for 14 years “unless sooner removed for cause by the President.”

The statute doesn’t have any language that specifically addresses the chairman of the Board of Governors, nor does it detail what exactly constitutes “for cause.” The term has been interpreted in legal rulings to mean “inefficiency, neglect of duty, or malfeasance.”

But the Supreme Court did make it clear that it might protect the Fed in a May decision allowing President Trump to fire the board members of two other independent agencies.

The high court said “we disagree” with arguments made by members of the National Labor Relations Board and the Merit Systems Protection Board that their legal challenges “necessarily implicate the constitutionality of for-cause removal protections for members of the Federal Reserve’s Board of Governors or other members of the Federal Open Market Committee.”

Ben Werschkul contributed to this article.

Click here for in-depth analysis of the latest stock market news and events moving stock prices

Read the latest financial and business news from Yahoo Finance