The dispute over the Federal Reserve’s headquarters renovation has become a test of accountability and the independence of the institution that helps shape economic policy. President Donald Trump said Powell should be sued by the federal government if he refused to resign. But a threat is not a lawsuit, and the Justice Department has said it will not reopen its criminal investigation into Powell over the renovation. The available reporting establishes a threat, not a filed case.
The Fed inspector general found that management and oversight failures contributed to renovation cost overruns, but found no grounds for a criminal referral. The report said the Fed failed to enforce a guaranteed maximum price and did not ensure rising costs reached senior leadership. The initial renovation estimate was $1.3 billion. These findings describe shortcomings in project oversight; they do not, by themselves, establish criminal wrongdoing by Powell. The report also made no claims about misconduct related to Powell’s Senate testimony.
There are limits on what has been established about the government’s case. A federal judge quashed subpoenas in the investigation, finding they had been issued for an improper purpose and that the government had produced essentially no evidence Powell committed a crime. The Justice Department says it will not reopen that investigation. The attorney general has nevertheless left open the possibility of separate action if an independent audit uncovers evidence of criminal wrongdoing. Whether the audit finds new evidence, and whether officials act on it, remain unresolved. The possibility of separate action is distinct from reopening the existing investigation.
The market tracking whether Trump or the government will sue Powell before the new year gives that outcome a 3%, according to Kalshi as of 4:56 p.m. ET on Oct. 4. That is what traders currently believe, not an objective forecast. Kalshi reported 990 contracts traded over the last day, with 2,615 contracts open. Trading was limited, and the displayed probability had not changed over the past day or week. The market therefore offers no sign of a recent shift in trader views; it does not establish that anyone has filed a suit or explain what officials will do next.
Powell remains on the Federal Reserve Board of Governors after leaving the chair; his term on the board runs until Jan. 31, 2028. The central uncertainty is whether an independent audit will find evidence that prompts separate government action, and whether a lawsuit follows before the year ends. The watchdog documented oversight failures but found no grounds for a criminal referral. The Justice Department says it will not reopen its existing investigation, while the attorney general has left a separate path open if the audit uncovers evidence of criminal wrongdoing. Those positions leave the outcome unsettled. For now, the public record supports a threat and an unresolved question about possible future action—not a filed lawsuit.
