$2.5 billion "Renovation Scandal" Holds Up New Fed Chair, Will Powell Receive a Subpoena Before Leaving?

The political game in Washington has never been more dramatic — an investigation into the renovation of the Federal Reserve headquarters is quietly rewriting the personnel changes at the world’s largest central bank. With just over two months until Chair Powell’s term ends in May, Trump’s nominated successor, Waller, is unexpectedly stuck at the Senate door. Not because of capability, but because the Senate insists on first clarifying: exactly how was the $2.5 billion spent on Powell’s building?

1. A subpoena, two deadlocks

● On March 11, Kevin Waller met with Republican Senator Tom Tillis for less than an hour. When leaving the office, the Trump-appointed candidate for the next Fed chair smiled and called the meeting “good,” but refused to discuss the key issue — whether he can smoothly take office.

● Tillis’s stance is clear: he will not support any Fed personnel nominations until the Justice Department finishes its investigation into Powell. The message is straightforward — without clearing Powell’s case, Waller won’t get through the Fed’s door.

● Time is running out. Powell’s term ends at the end of May, and Senate confirmation takes at least a few weeks. If Tillis blocks the process, Waller’s nomination might not even get out of the Banking Committee. The root of this deadlock dates back to 2017.

● That year, the Fed’s Washington headquarters renovation was approved, initially budgeted at $1.9 billion. By the time construction actually started in 2022, the budget had risen to nearly $2.5 billion. Trump repeatedly criticized it as “luxurious,” even claiming the actual cost reached $3.1 billion. Powell argued that the overspending was mainly due to rising labor and material costs, as well as asbestos removal from the old building.

● But things suddenly escalated in January this year. The Justice Department issued a subpoena to the Fed, threatening criminal charges over Powell’s statements during his Senate testimony in June 2025. Powell issued a rare strong statement: these allegations are “merely excuses,” and the real reason is that he didn’t cut rates as the president wanted.

2. “Fake investigation” or “necessary review”?

● Interestingly, Tillis called this investigation a “fake investigation,” hoping it would end quickly. It’s quite ironic coming from a Republican senator — after all, Trump is the driving force behind the probe.

● White House National Economic Council Director Harris also tried to cool the situation. In an January interview, he said he expected the Justice Department’s investigation “won’t have substantive results,” because he believes Powell’s testimony is truthful. Essentially saying: “Investigate, but don’t take it too seriously.”

● However, the investigation’s direction has subtly shifted. Media reports in mid-March said the chief prosecutor handling Powell’s case has been replaced. Tillis seized this opportunity to reiterate: no end to the investigation, no confirmation. Whether there will be a result has become a key variable in Waller’s potential appointment.

● Waller remains silent on the investigation. During their meeting, Tillis didn’t ask, and Waller didn’t volunteer. This deliberate avoidance only fuels curiosity — what is this Harvard graduate, former Fed governor from Morgan Stanley, waiting for?

3. The Fed’s “dilemma” extends beyond personnel changes

If you think this is just Washington’s internal fight, you underestimate its significance.

● The current Fed faces an extremely awkward situation: inflation isn’t under control, but employment is collapsing. Data released in early March showed that non-farm payrolls unexpectedly decreased by 92,000 in February, and the unemployment rate rose to 4.4%. Meanwhile, oil prices surged past $110 per barrel amid geopolitical conflicts, and gasoline prices jumped from below $3 to $4.35.

● Weak employment + rebounding inflation is the classic “stagflation” warning sign. Inside the Fed, debates are raging — some advocate holding steady, others worry that not cutting rates will damage employment, and some warn that energy prices could spiral inflation out of control.

● At this critical juncture, leadership change is also stalled. Whether Waller takes over or Powell stays until the investigation concludes, the Fed will struggle to produce a clear policy roadmap in the short term.

● Deeper still, the Fed’s independence is being openly challenged. Trump has repeatedly expressed hope that under a new chair, “interest rates will drop significantly.” Waller’s past hawkish record and his recent alignment with Trump’s rate-cutting calls create a subtle contrast.

● Some scholars sharply point out: the issue now isn’t “whether to cut rates next time,” but “who will define the Fed’s boundaries, rules, and interpretive authority.” If even the central bank’s independence is up for renegotiation, can the dollar and U.S. debt pricing still remain stable?

4. Two months to go

● May is approaching fast. Powell’s departure date is also the window when the investigation might produce results.

● Tillis says he hopes to “remove obstacles as soon as possible” so Waller can meet the May transition. But “as soon as possible” in Washington is measured in weeks or months, not days. Moreover, the Justice Department personnel changes don’t necessarily mean the investigation will end abruptly.

● For Waller, this confrontation comes at an inopportune time. He should be familiarizing himself with Fed operations, preparing for the transition, and establishing communication with FOMC members. Instead, he’s spending much of his time lobbying senators and dealing with an investigation unrelated to him.

● For Powell, the remaining months are likely to be difficult. The shadow of criminal investigation, subpoena pressure, and bipartisan scrutiny make his final months a torment. And for markets, the biggest uncertainty may be: can the Fed, deeply entangled in political battles, still maintain the “technocratic” calm and detachment it has shown for decades?

● The $2.5 billion renovation isn’t just an overspending bill — it’s a contest over the boundaries of power, institutional trust, and monetary policy independence. Two months from now, when Powell hands over the keys, these questions will still hang in the balance.