WASHINGTON – Anyone who has recently undertaken a home renovation project that has suffered from rising costs, bottlenecks and delays now has excellent company: The Federal Reserve, the U.S. body charged with controlling inflation, is also struggling to keep the to keep expenses low for their palatial digs.
The central bank is in the midst of a long-running project to convert three adjacent office buildings overlooking the National Mall into a state-of-the-art campus. The price for the venture has risen to nearly $2.5 billion from a 2019 estimate of $1.9 billion — an increase of about 34%.
Budget documents released late last year show the cost of the overall project has been pushed up due to “significant increases” in the cost of steel, cement, timber and other materials that “far exceed standard cost increases.”
Most of the overruns are for the gutting and renovation of two buildings: the Fed’s headquarters, completed in 1937 and named for then-Fed Chairman Marriner S. Eccles, and an adjacent building now known as “FRB-East.” is. The Fed acquired the building, which opened in 1933, from the Department of the Interior five years ago. Renovations on both began last year and are expected to last until 2027.
By then, Fed leadership has retreated to a third building overlooking its headquarters from the north: the William McChesney Martin Jr. Building. It originally opened in 1974 and reopened in late 2021 after a major renovation that includes bathroom door sensors for hands-free opening and two Italian honey beehives on the roof.
A couple poses for a selfie in front of William McChesney Martin Jr.’s Federal Reserve Board building. In late 2021, the building reopened after a major renovation.
Photo: KEVIN LAMARQUE/Portal
Fed officials say their goal is to move the majority of board employees to offices that are closer together and reduce the central bank’s leased space in downtown Washington.
The end result will serve most of the 3,000 economists, lawyers and professionals who support the central bank’s seven-member board of governors, who set interest rates to guide economic growth and oversee the nation’s financial system.
The massive construction project has largely flown under the radar, unusual in a city where regulators sometimes face stiff congressional protests over such facelifts. For the past decade, Republican lawmakers have pilloried the $145 million brutalist-style retrofit of offices that house the Consumer Financial Protection Bureau near the White House.
In the 1990s, two Democratic senators unhappy with the Fed’s campaign to stave off inflation with hefty rate hikes made a stink about their budget, including building a towering new headquarters for the regional Fed bank — there are 12 over the Fed scatters country – in Dallas.
The Fed has been here before. Amid rising inflation in 1969, she delayed plans to construct the Martin Building, at that time an estimated cost of more than $30 million, and called on other regional Fed banks across the country to do their part to combat high prices. by making planned plans postponed construction activity. “This was done to minimize competition for scarce goods and services during the current phase of inflation,” the Fed said at the time.
The New York Fed’s plans to construct a new building in Lower Manhattan in the 1920s rose to over $25 million, well above an original estimate of $10 million. A banking regulator complained in the New York Times at the time that the “luxurious and lavish decor of marble and brass” “made Solomon’s ancient temple look rather cheap in comparison.”
This time, costs have also increased due to design changes requested by local planning officials. While the Fed can move trillions with the click of a mouse, erecting a building in the District of Columbia is another matter.
Federal Reserve Board Chairman Jerome Powell at a press conference at the Federal Reserve Board Building in Washington, DC, in November 2022.
Photo: Mandelngan/Agence France-Presse/Getty Images
“We have a built-up country and it’s difficult to get zoning,” Fed Chair Jerome Powell said last November. While addressing a source for higher home construction costs, he might as well have been talking about the project in his own backyard.
The National Capital Planning Commission and the US Commission of Fine Arts, century-old government agencies that review building proposals for federal property in the region, only approved the Fed’s renovations after the central bank toned down certain design flourishes, particularly opposite the FRB-East Building.
For example, members of the Fine Arts Commission in 2020 criticized the proposed addition of a five-story “brightly lit glass box” to FRB-East, saying it would look unsightly at night and clash with an older, more modest Depression-era building. The Fed agreed to lower the height and add a pattern of semi-opaque glass panels to make the addition more consistent with the original building. To make up for some of the lost space, the new plans have more square feet underground, which the Fed says has pushed the price up.
The Eccles Building, constructed in the “Stripped Classicism” style with white Georgia marble, was designed by French-born Philadelphia architect Paul Philippe Cret after legislation sponsored by President Franklin D. Roosevelt removed the central bank from the Treasury Department had relocated. Its boardroom, with 26-foot ceilings, briefly housed US and British military advisers during World War II as it was one of the largest air-conditioned rooms in the city.
The Fed has toned down a planned addition to one of the buildings it is renovating known as FRB-East. The top rendering is an earlier design, the bottom rendering is the toned down design.
Photo: FORTUS, a joint venture between CRTKL and Quinn Evans
Current and former employees and policymakers say the building has deteriorated over time. They described leaky ceilings, outdated electrical systems, and inefficient heating and cooling systems.
The recently completed renovations to the Martin building have been plagued by delays. In 2015, the Fed fired the original architecture and engineering firm that had been hired for the job over what an internal watchdog described as shoddy work. Costs rose again when workers had to remove more asbestos than expected.
This renovation work was overseen for several years by Mr. Powell, who served as governor before becoming chairman in 2018. His signature adorns an exposed piece of steel beam in a top-floor cafeteria that offers panoramic views of the DC skyline. In the 1990s, Fed Chairman Alan Greenspan hosted lawmakers, Supreme Court justices and reporters at a fireworks party on July 4th from an adjacent patio.
The new building boasts luxurious amenities: the boardroom, where the Fed’s rate-setting committee meets, has a special faucet with still, sparkling, or chilled water, and the basement features artwork from the Fed’s private collection, including works by Andy Warhol and Alexander Calder .
But the open-office design drew grumbling from some Fed employees, including those who work with sensitive banking or other classified information.
Construction of Federal Reserve Headquarters, named for then-Chairman Marriner S. Eccles, ca. October 1936.
Photo: HUM Images/Universal Images Group/Getty Images
Unlike other federal agencies, the Fed is not subject to annual funding from Congress, and instead pays for its operations through the interest it earns managing the nation’s money supply, so its renovations did not require external legislative approval.
However, the Fed is expected to turn a loss this year for the first time in its 110-year history as it pays more money in interest to banks and other financial institutions on cash held at the central bank when it hikes rates than it will with securities and other assets it owns will earn $8.3 trillion.
The Fed hiked rates last year at the fastest rate since the early 1980s to combat inflation, which also hit 40-year highs. The appearance of a 10-foot construction barrier around the Eccles building last year fueled speculation among some market observers – wrongly – that it was a new security measure deployed to protect the central bank’s headquarters against public protest.
To avoid such confusion, last fall the Fed added a brief explanation of the construction project to a lengthy list of “FAQs” on its website.
The Fed is open for business, it said, “and Federal Reserve operations are unaffected.”
The Marriner S. Eccles Federal Reserve Building in Washington, DC in November 2022.
Photo: Graeme Sloan/Bloomberg News
Write to Andrew Ackerman at [email protected] and Nick Timiraos at [email protected]
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