The Federal Reserve is pushing ahead with an eye-watering $2.5 billion revamp of its Washington, D.C. HQ despite mounting losses as one ex-official accused its bureaucrats of behaving like French royalty over their frivolous spending.
The glorified vanity project, first rubber-stamped by government pen-pushers in 2021, is now effectively being subsidized by American taxpayers because the Fed has not made a profit since 2022.
“The Federal Reserve is building the Palace of Versailles on the National Mall,” said Andrew T. Levin, professor of economics at Dartmouth College in New Hampshire, referring to the long-deposed French monarchy’s official residence just outside Paris.
“Congress must put its foot down and take a closer look at this to determine what authority the Fed has to spend this on its buildings,” Levin, who served with the Fed’s board from 1992 to 2012, added.
The Post has approached a Federal Reserve spokesperson for comment.
The expensive makeover is controversial after the Fed posted operating losses of $77.5 billion last year.
That is still down from losses of $114.6 billion in 2023 when the central bank sank into the red for the first time in its 100-year history. Officials there insist that losing money in no way impacts their ability to operate and conduct monetary policy.
The Fed’s interest costs surged and outstripped its earnings on bonds it owns when Fed Chair Jerome Powell hiked rates in trying to tame rampant inflation during the Biden administration.
When the Fed makes a profit, that money is then passed on to the US Treasury to become part of the federal government’s budget.
Its mounting losses, currently some $178 billion, are bundled together in what is known as the Fed’s “deferred asset” that is must pay down before money can be spent on other things such as defense, education, and Medicare.
A 2023 study by experts at the St Louis Fed forecast that it will not happen until mid-2027 at the earliest.
It means the the costly renovations, ten times what was spent on the nearby Ronald Reagan building, could come under the microscope of GOP bigwigs keen to crack down on excessive spending.
The latest revelations come after President Trump walked back threats to fire Powell in a long-running spat over the speed of the Fed’s interest rate cuts.
The overhaul, which was managed by Powell when he was a Fed governor, is focused on modernizing two downtown complexes on the Fed’s D.C. campus, known as the Eccles and FRB-East buildings.
The plans include rooftop garden terraces, skylights, ornate water features, and a new elevator system that allows board members to be dropped off directly in their VIP dining suite.
Planning documents promise a refresh inspired by the Eccles’ original style, designed by French-born Philadelphia architect Paul Cret.
It says both buildings will use Georgian white marble and “create a place where the interchange among citizens would be advanced within the framework of the republic’s institutions.”
Costs have ballooned by nearly 32% from a 2019 estimate of $1.9 billion to complete with all of the work set to be finished in 2027.
Planning documents posted online blame “significant increases” in the cost of building materials that “far exceed standard cost escalations.”
“The Fed is funding this construction project by borrowing from the public,” said Dartmouth’s Levin. “But the Fed’s spending doesn’t go through any congressional appropriation, and its borrowing isn’t included in the federal debt ceiling.”
The Fed’s 3,000 staff are mainly working out of the William McChesney Martin Jr building, which underwent a previous upgrade that was completed in 2021.
The Wall Street Journal revealed in March 2023 that its basement now hosts the Fed’s private art collection, while a pair of Italian beehives were installed on the roof.
Joe Grogan, who served in the Office of Management and Budget during President Trump’s first term, told The Post that spending $2.5 billion on new offices was “crazy.”
“It’s a long-held axiom that any time a corporation builds an extravagant new headquarters, it’s time to sell the stock,” said Grogan, who oversaw domestic healthcare spending of $1.3 trillion during his two-year stint at the spending watchdog.
“Let’s hope the Feds’ new HQ doesn’t mean that we’re headed for a crash,” he added.
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