The political game in Washington has never been so dramatic—a probe into the renovation of the Federal Reserve headquarters is quietly rewriting the personnel turnover process of the world's largest central bank. With just over two months left until the current chairman Powell's term ends in May, Trump's nominee for the successor, Waller, is unexpectedly stuck at the Senate's doorstep. It's not due to lack of capability, but because the Senate demands clarity first: how did that building spend $2.5 billion during Powell’s tenure?

1. A Subpoena, Two Deadlocks

● On March 11, Kevin Waller's meeting with Republican Senator Thom Tillis lasted less than an hour. As he exited the office, the Trump-appointed nominee for the next Federal Reserve chairman smiled, praising the meeting as “good,” but did not discuss the most critical issue—whether he can smoothly take office.

● Tillis's attitude was very clear: he would not vote for any Federal Reserve personnel nominations until the Department of Justice’s investigation into Powell is concluded. The meaning of this statement could not be more straightforward—unless Powell's issues are clarified, Waller should not expect to enter the Federal Reserve.

● Time is of the essence. Powell's term ends in late May, and the Senate confirmation process will take at least a few weeks. If Tillis cannot pass this hurdle, Waller's nomination may not even make it out of the banking committee. The root of this deadlock goes back to 2017.

● In that year, the renovation project of the Federal Reserve headquarters in Washington was approved with an initial budget of $1.9 billion. By the time true construction began in 2022, the budget had ballooned to nearly $2.5 billion. Trump repeatedly criticized this as a “lavish renovation” and even claimed that the actual cost soared to $3.1 billion. Powell defended that the overruns were primarily due to rising labor and material costs and the need to remove asbestos from the old building.

● However, this issue suddenly escalated in January this year. The U.S. Department of Justice issued a subpoena to the Federal Reserve, threatening to file criminal charges regarding Powell's testimony in the Senate in June 2025. Powell issued a rare strong statement: these allegations were “just an excuse,” and the real reason was that he did not lower interest rates at the president's behest.

2. “Fake Investigation” or “Necessary Review”?

● Interestingly, Tillis referred to this investigation as a “fake investigation,” hoping it would come to an end soon. This statement from a Republican senator is rather ironic—as Trump is the one behind pushing the investigation.

● The White House National Economic Council director Hassett also came out to cool things down. In a January interview, he stated that he expected the Department of Justice's investigation “would not yield substantive results,” because he believed Powell's testimony was truthful. This statement equates to saying: let the investigation happen, but don't take it too seriously.

● However, the direction of the investigation did indeed show subtle changes. According to media reports in mid-March, the “chief prosecutor” responsible for the Powell case has been replaced. Tillis seized this opportunity to once again reiterate: no investigation closure, no nomination discussion. Whether this investigation will have results has become a key variable affecting Waller's ability to assume office.

● Waller himself remained tight-lipped about the investigation. During the meeting, Tillis did not ask, nor did he bring it up himself. This deliberate avoidance only piques curiosity: what is this Harvard-educated, former Morgan Stanley executive waiting for?

3. The Federal Reserve's “Dilemma” Goes Beyond Personnel Changes

If one thinks this situation is merely an internal struggle in Washington, then it underestimates its significance.

● The current Federal Reserve is facing an extremely awkward situation: inflation has not been controlled, but employment has already collapsed. Data released in early March showed that in February, the U.S. non-farm payroll unexpectedly declined by 92,000, and the unemployment rate rose to 4.4%. Meanwhile, under the influence of geopolitical conflicts, oil prices surged over $110 per barrel, and gasoline prices soared from under $3 to $4.35.

● Weak employment + rebounding inflation is precisely the harbinger of “stagflation” that economists fear the most. There has been fierce debate within the Federal Reserve—some advocate for maintaining the status quo, while others worry that not lowering rates will collapse employment, and some warn that energy prices might cause inflation to spiral out of control.

● At this critical juncture, the leadership is about to change, yet the process of changing leaders is stuck. Regardless of whether Waller steps up or Powell stays on until the investigation concludes, the Federal Reserve will find it difficult to present a clear roadmap in a short time.

● Deeper issues lie in the fact that the Federal Reserve's independence is being publicly challenged. Trump has repeatedly stated that he hopes for a “significant drop in rates” under the new chairman’s leadership. Waller's past hawkish record and his recent alignment with Trump’s call for rate cuts create a subtle contrast.

● Scholars have pointedly noted: the issue is no longer “whether to cut rates next time,” but “who gets to define the boundaries, rules, and interpretation of the Federal Reserve.” If the independence of the central bank has to be renegotiated, how can the pricing logic of the dollar and U.S. Treasuries be sustained?

4. Countdown of Two Months

● May is approaching. The day Powell leaves office also coincides with the time window when the investigation may yield results.

● Tillis stated he hopes to “eliminate obstacles as soon as possible” so that Waller can be timely present for the handover in May. But “as soon as possible” in Washington is never measured in days, but in weeks and months. Moreover, changes in personnel within the Department of Justice do not necessarily mean that the investigation will come to a hasty conclusion.

● For Waller, this encounter has come at an inconvenient time. He should have used this time to familiarize himself with the Federal Reserve's operations, prepare a handover plan, and establish communication with FOMC members. Now, he has to spend a lot of energy lobbying senators and also be tied to an investigation that is unrelated to himself.

● For Powell, the remaining term may also not be smooth. The shadow of a criminal investigation, the pressure of subpoenas, and the attacks from both parties have turned the last few months for this Federal Reserve chairman into a torment. Meanwhile, for the market, the greatest uncertainty may lie in whether a Federal Reserve deeply entangled in political maneuvering can still maintain the calm and detachment of the “technocrat” style seen over the past few decades?

● The $2.5 billion building renovation has unearthed not just an overspent bill but a struggle over the boundaries of power, institutional trust, and the independence of monetary policy. Two months later, at the moment Powell hands over the keys, these questions will still remain unanswered.

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