Powell probe: The politics of marble could weigh heavily on the Federal Reserve as an institution

The alleged offence: a $2.5 billion renovation of the Fed’s Marriner S. Eccles headquarters and adjacent 1951 Constitution Avenue building. The director of the Office of Management and Budget has likened it to Versailles and denounced its cost overruns—placed at about $700 million—as “outrageous."

Louis XIV, one gathers, would have blushed. The implication is that central bankers have mistaken monetary policy for interior design. A professor of law and finance at Columbia University offers a less theatrical view: “A renovation that goes over budget is not malfeasance. Renovations go over budget all the time." This is not an exotic claim.

The Fed project’s bill—roughly $2,000 per square foot—looks extravagant until one glances at precedent. By federal standards, this is expensive but not aberrant. The Smithsonian’s National Museum of the American Indian cost about $800 per square foot when it was completed in 2004, or nearly $1,400 in today’s dollars.

Some of the Fed’s budgetary excess is self-inflicted. The central bank reportedly chose to add square footage for an underground staff car park and a tunnel linking the two buildings. Critics note that 500 parking spaces could have been leased nearby for roughly $30 million. Instead, the subterranean option is estimated to cost nearly 10 times that. This is not cost discipline at its finest.

Yet, comparisons with London, where civil servants and Bank of England staff are expected to take public transport, are tempting but misleading. Washington is not London: public transport is patchy and onsite parking is common in federal Washington.

This pattern has a name. Bent Flyvbjerg and Dan Gardner in How Big Things Get Done call it the Iron Law of Megaprojects. Their dataset spans more than 16,000 projects across 136 countries. Only 8.5% hit both cost and time targets. Just 0.5% managed cost, time and benefits simultaneously. The lesson is clear and scary: over budget, over time and short of benefits—over and over again. It afflicts almost every project and America is not alone.

The European Central Bank’s headquarters in Frankfurt arrived three years late and exceeded its original budget by €350 million. Nasa’s James Webb Space Telescope ran seven years late and its final cost was an astronomical 450% over budget.

Even in Switzerland, the nation of precise clocks and punctual trains, the Lötschberg Base Tunnel was completed late with a cost overrun of 100%. The Sydney Opera House cost 1,400% more than planned. Trump’s Taj Mahal casino in Atlantic City was initially pitched at $250 million, ultimately cost more than $1.1 billion and filed for bankruptcy within a year.

The true pathology, as the project management literature makes clear, is not overspending but underestimation—bad anchors, optimistic forecasts and political incentives that reward approval over accuracy.

The Empire State Building is famous not just for its height, but for finishing under budget and ahead of schedule because it was planned conservatively and executed ruthlessly. It is the exception that proves the rule—and illustrates how rare competence is, not how common.

The Fed’s critics have also sniffed at its art collection—staff displays, presidential portraits, tasteful abstractions. Austria’s central bank owns nearly 50 historical string instruments, including nine Stradivarius violins. The Fed, by contrast, looks restrained. Its interiors are certainly less opulent than those of the Banque de France, whose splendour once prompted a central banker to quip that France could return to the gold standard if it melted down the décor.

All this makes this political escalation more troubling than the project’s invoices. Federal prosecutors being mobilized against a finance chief over a procurement dispute has made the world sit up. If China wished to undermine the dollar’s status as the world’s reserve currency, it could hardly have designed a better advertisement than a US president threatening the Fed’s independence.

Reserve currencies are underwritten by credible institutions. The marble will endure. Whether the institutional norms that underpin the dollar will do the same is a more serious—and far more expensive—question.

The author is a former executive director, Nomura and currently a visiting faculty at various India B-schools.