Darian Woods (2:48)

The Fed has lowered interest rates a little, but. But that might not continue. As we found out this morning, inflation is 2.7%. That's above the Fed's goal of 2%.

Waylon Wong (2:59)

Trump has repeatedly criticized Powell for being too late on rate cuts. The President claimed on NBC News on Sunday night that he didn't know about the subpoenas that the Fed received. But that Powell quote, is not very good at the Fed and he's not very good at building buildings. By the way. This is not a metaphor. We are talking about literal buildings. Yeah.

Darian Woods (3:19)

Powell implies that the subpoena is focused on some renovations. So let's go over some history. In 2017, the Fed board approved the renovations of two Fed buildings. These are along the National Mall. And the project was always going to be an expensive proposition for a few reasons.

Waylon Wong (3:38)

These buildings haven't had comprehensive renovations since they were first built in the 1930s. They have asbestos and lead, old plumbing, heating and ventilation systems. And of course you've got historical consideration. So it's a huge job to modernize them.

Darian Woods (3:52)

Costs have risen since. In 2021, the cost was estimated at $1.9 billion. Now the costs are estimated at around 2.5 billion, a 32% increase. The Fed attributed these to general inflation, more asbestos being discovered, and design changes after consulting with others. Regardless, these cost increases, plus some of the language used to describe the renovations, caught the eye of some Republican lawmakers.

Waylon Wong (4:22)

Rooftop garden terraces, like Republican Senator Tim Scott at Powell's regular update to the Senate Banking Committee mid last year.

NPR Announcer (4:29)

The ornate water features and final plans. The new elevators that dropped board members off at the VIP dining suite was page 37 of the final plans. The white marble was pages 40, 41, 65 of the final plans.

Waylon Wong (4:44)

Powell hit back.

Jerome Powell (4:46)

Can I just quickly say some of those are just flatly misleading the idea of elevators. You know, it's the same elevator. It's been there since the building was built. So that's, that's a mischaracterization. And some of those are no longer in the plans. They, you know, that's, that's several weeks later.

Darian Woods (4:59)

Trump seemed to cool down on the whole debacle after visiting the construction site with Jerome Powell.

Waylon Wong (5:05)

Ah, yes, I remember that interaction well. They had a little hard hat photo op and then I got kind of derailed with this back and forth over the price tag.

Darian Woods (5:14)

So the 2.7 is now 3.1.

Jerome Powell (5:17)

I'm not aware of that. Yeah, it just came out. Yeah, I haven't heard that from anybody at the Fed.

Darian Woods (5:23)

Straight out of the office.

Waylon Wong (5:28)

Yeah. So as Powell implies, like with the elevators, the details are not as scandalous when you dig into them. That so called rooftop garden terrace is actually at ground level. It's Just a garden on top of an underground parking lot. The new water features have been removed from the plan, and the marble is restoring the original marble.

Darian Woods (5:48)

Now, nobody loves cost overruns, and project managers can do better at preventing them. But spending more than you originally planned on large projects is incredibly common. For a past episode, I spoke to Danish researcher Bent Flubajer. He looked at 16,000 large projects worldwide, and he found that 92% of them went over budget, over schedule, or both.

Waylon Wong (6:13)

So garden variety cost overruns are not criminal. But was Powell's testimony last year, did he knowingly make a false statement to Congress? We don't have the exact subpoena from the Department of Justice, but based on what Powell has said seems to be implying that Powell lied to the Senate Banking Committee last year about the renovations. So you could squint and find discrepancies. Like when Powell said there's no roof garden terraces, was that true? If they're on top of an underground parking lot, yeah.

Darian Woods (6:41)

But all of this is just really splitting hairs. The reality is that the Fed's website backs up the substance of what Powell said in testimony. One of the key parts of perjury is what's called materiality. If Powell knowingly misled Congress, would that have had a material impact on how lawmakers made their decisions? Like, would Congress have done anything differently if they had better information about the greenery on top of the underground parking lot?

Waylon Wong (7:09)

Powell says we need to look at the bigger picture here. Trump has made it clear that he wants the Fed chair to do his bidding on interest rates. He started his attacks on Powell during his first term, and things have escalated during this administration. Remember, Trump tried to fire Fed official Lisa Cook. She sued the administration, and the Supreme Court is expected to hear that case soon.

Darian Woods (7:30)

Now, the Fed seems to have been defending itself. In December, it reappointed a slate of regional Fed presidents, extending their terms. This has the effect of reducing the impact impact Trump or Trump appointees can have on who leads the different Fed banks. This is important because these Fed presidents take turns on voting on interest rates. University of Michigan economist Justin Wolfers wrote on social media. If I'm reading this properly, they just Trump proofed the Fed and this math.

Waylon Wong (8:00)

Around who votes when gives us a clue as to why these attacks on Jerome Powell are happening. Now, like Powell is very close to ending his term as Fed chair in May. But the thing is, he can go back to his old voting role as a regular Fed governor, sticking around, voting how he likes until 2028. That's not something Trump would be happy about.

Darian Woods (8:21)

Yeah, and if I were the new Fed chair coming in, this would certainly make me a little bit nervous about defying the president.

Waylon Wong (8:29)

We've talked a lot on the show about how important central bank independence is. It's a pretty clear correlation internationally that the more politicians meddle, the higher inflation goes. This could explain why various Republican lawmakers have opposed opposed the subpoenas targeting Powell. Some, like Senators Tillis and Murkowski, have even issued statements criticizing the move.

Darian Woods (8:50)

So far, the market reaction has been fairly muted. This is a notable, but not necessarily unsurprising chapter in what's been simmering the last year the politicization of the Fed. In years past, no one's been particularly interested in what party appointed which Fed governor. Now the Trump administration seems to be doing everything it can to make a body filled with loyalists, including what appears to be fairly weak legal action against the board's chair.

Waylon Wong (9:23)

This episode was produced by Corey Bridges with engineering by Kwesi Lee. It was fact checked by Sarah Juarez. Kate Concannon edits the show, and the indicator is a production of npr.