The $2.5 billion renovation at the center of the DOJ's criminal investigation of the Federal Reserve

When the Department of Justice served the Federal Reserve with subpoenas in a criminal investigation on Friday, it zeroed in on the years-long renovation of the central bank’s headquarters in Washington, D.C.

But at issue here is not just the cost of the multibillion-dollar construction project. It’s also the extent to which it has become a vehicle for the White House to apply political pressure on an institution designed to operate independently of the federal government.

The dispute over the cost of the renovations has unfolded as President Donald Trump openly criticizes Federal Reserve Chair Jerome Powell over the central bank’s interest rate analysis, repeatedly pressuring the Fed leader to lower borrowing costs.

But while Trump has publicly pressed Powell for years over interest rates, it’s only in the last six months that the president has also been critical of the renovation’s multibillion-dollar price tag.

The historic renovation itself is far more complex — and longer in the making — than the fight over how much it cost.

The project centers on two historic buildings, the Marriner S. Eccles Building, which was finished in 1937 as the Fed’s headquarters, and the 1951 Constitution Building, which was completed in 1932. The 1951 building has been used for various purposes over its lifetime, but was formally transferred to the central bank in 2018.

The Eccles Building is located at 20th Street and Constitution Avenue N.W., overlooking the National Mall and three blocks up from the White House.

The current renovation was proposed and approved by the Fed’s board in 2017, when Powell was a member of the board but not yet its chair. Since then, the project has been subjected to annual budget reviews by Fed leadership.

According to the central bank, the project involves a full overhaul of the buildings, which have not undergone comprehensive renovations since the 1930s. The updates include removing hazardous materials such as asbestos and lead, replacing decades-old electrical, plumbing, heating, ventilation and air conditioning, and upgrading structural work to bring the buildings in compliance with modern-day codes.

The total price tag for the renovations, which are slated for completion in 2027, stands at $2.5 billion, according to Fed documents. But this is not money from U.S. taxpayers.

Unlike most federal agencies, the Federal Reserve funds its own operations, primarily by generating income from interest on government securities and fees charged to banks. Any excess profits are returned to the U.S. Treasury. This keeps taxpayer dollars out of the equation.

Still, Trump and his allies have argued the renovations reflect wasteful spending and mismanagement of funds.

The Fed has pushed back on those claims, saying various factors have led to increased project costs over time, including the age and status of the buildings. Both structures are listed in the District of Columbia Inventory of Historic Sites, and the 1951 Constitution Avenue Building is listed on the National Register of Historic Places.

These designations require that any renovations be carried out in extensive coordination with multiple federal and local preservation agencies. That has led to changes in the original building designs.

Fed officials have also pointed to higher labor and materials costs since the project was first approved in 2017, including supply chain shocks tied to the COVID-19 pandemic and Trump’s tariffs.

Those explanations have been sharply criticized by a handful of Trump allies, including Russell Vought, director of the Office of Management and Budget, who has called for greater scrutiny of the project.

In testimony before the Senate on June 25, which caught the attention of the White House, Republican Sen. Tim Scott, S.C., asked Powell about the Fed’s renovations.

Scott accused Powell of having “spent billions on lavish renovations” that included “rooftop terraces, custom elevators that open into VIP dining rooms, white marble finishes and even a private art collection.”

Powell responded to each of Scott’s questions. “There’s no [VIP] dining room. There’s no new marble. We took down the old marble, we’re putting it back up. We’ll have to use new marble, where some of the old marble broke. But there’s no special elevators. There’s just old elevators that have been there. There are no new water features. There’s no beehives, and there’s no roof terrace gardens.”

On July 10, Vought wrote a letter to Powell that would mark a new phase in the renovation saga.

Vought told the chair that Trump himself was “extremely troubled by your management of the Federal Reserve System.” Vought called the construction project “ostentatious,” citing many of the features Scott had asked about, and which Powell had already said did not exist.

A few days later, Vought told CNBC that an investigation was warranted into whether the Fed had misled members of Congress about the project’s cost, calling the office building “a palace.”

In Powell’s formal response to the accusations, he wrote to Vought that the Fed had taken “great care” to ensure the renovation project was closely overseen throughout the life of the project.

The Fed’s renovation project gained even more attention after the president made a rare and high-profile visit to the Fed on July 24, becoming the first sitting president since to visit the central bank’s headquarters in nearly 20 years.

Trump toured the construction site alongside Powell as the pair, donning hard hats, fielded questions from reporters.

In one stunning exchange on the tour, Trump and Powell sparred over the project’s cost after Trump claimed the price tag had risen to $3.1 billion. As the cameras rolled, Powell refuted the president’s numbers, noting they improperly included a third building renovation completed years earlier.

Later on, Trump appeared more cordial, telling reporters that he would like to see the renovations get finished.

“I don’t want to be personal,” he said at the time. “And in many ways, it’s too bad it started, but it did start. And, it’s been under construction for a long time.”

But even with the focus of the day on the construction project, Trump did not deny his bigger point of contention with the Fed.

Asked what else he would like to see from Powell, the president replied, “Well, I’d love him to lower interest rates.”