Andy Levin on the Importance of an Independent Inspector General at the Federal Reserve - BONUS

Andy Levin is an advisor to many central banks around the world and professor of economics at Dartmouth College. Andy returns to the show for a special bonus episode to discuss his pervious appearance and accompanying policy brief where he calls for an independent inspector general at the Federal Reserve.

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This episode was recorded on June 10th, 2025

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected]. 

David Beckworth: Welcome to Macro Musings, where each week we pull back the curtain and take a closer look at the most important macroeconomic issues of the past, present, and future. I am your host, David Beckworth, a senior research fellow with the Mercatus Center at George Mason University, and I’m glad you decided to join us.

Hey, Macro Musings listeners, this is a special bonus episode of the podcast with a special returning guest. That guest is Andy Levin, a professor of economics at Dartmouth College, a former Fed staffer and a longtime adviser to many central banks. Andy joined us a few months ago on the podcast to discuss a policy brief he had just published at the time that was titled, “Is the Federal Reserve Overstaffed or Overworked? Insights from the Fed’s Financial Statements.”

This policy brief and Andy’s appearance on the podcast generated a lot of interest, conversations, and some pushback from the Fed itself. In fact, the policy brief was cited in a breaking Bloomberg News story about the Fed cutting back its workforce by 10%. I wanted to get Andy back on the program to respond to all the conversation and interest that he has generated with his work. Andy, welcome back to the program.

Andy Levin: Oh, great to be with you, David.

Beckworth: It’s great to have you on and thank you for returning. Like I said, I received a lot of feedback on your policy brief and on the podcast. Now, I was at a number of conferences in May, Andy, so there were a lot of Fed people there so maybe it was inevitable I would get this feedback. It sure seems like your podcast and policy brief were the topic of interest among the people I ran into at these conferences.

Federal Reserve and an Independent Inspector General

I understand you’ve had some feedback as well. You are responding to a lot of these questions with a new policy brief that’s titled “The Federal Reserve Should Welcome the Appointment of an Independent Inspector General.” Let’s go back to your original policy brief at the time and what lit the fire. In the broader context of that policy brief and I believe what starts the new policy brief is your call for an independent IG at the Fed. Is that right?

Levin: Yes. Actually, this is a theme that has been emphasized in several Mercatus policy briefs. The first one was with Bill Nelson several years ago where we were looking at the cost of the Fed’s balance sheet programs on the order of $1.5 trillion. Then more or less a year ago, Christina Skinner and I wrote a brief called “Central Bank Undersight” about how to strengthen Congress’s oversight of the Federal Reserve.

That theme then continued in the brief that you and I discussed a few months ago looking at the Fed’s staffing and personnel and the rationale that that provided for having more careful oversight of the Fed. That would actually be important for the Fed itself. I think that the key point here really is that the Fed plays a crucial role in setting monetary policy. It’s absolutely crucial to the economy, to ordinary people and their jobs and livelihoods, and the Fed needs to be independent in making those decisions.

A key theme here really going through all of this work is that accountability and legitimacy and transparency are cornerstones and foundations for allowing and enabling the Fed to continue to be independent in making those monetary policy decisions.

Beckworth: I think it’s important to stress this. This is the thrust of your work that you’ve done for us as an independent IG because we do care about the independence of the Fed. I had a number of people ask, “What is the point of Andy in this essay, the podcast?” I reminded them this is what Andy’s doing. You’ve got to look at the arc of his essays. He’s pushing for an independent IG. This new policy brief that you’re just releasing really makes this clear. You also compare this to private organizations, right? They also have something similar to an IG or an outside review that takes place within them.

Levin: Yes. In fact, I think that the sign of a healthy organization is that the leaders want to get outside views, outside experts to take a close look at what they’re doing. Of course, the Fed gets lots of commentaries from outside, from financial analysts and media commentators and academic scholars. But what’s really critical for an effective review is to give people access to the sensitive information that’s not made readily available to the general public.

For example, when a big corporation hires management consultants to come in, those consultants get access to information that no one else would ever see, and an ability to talk to the staff and other officials at that organization. Again, this would be a top hospital or a corporation, even smaller businesses, privately held businesses. They welcome having expert consultants come in and take a look at what they’re doing. How can we do better?

That’s what the Federal Reserve should be welcoming. The Federal Reserve should be thrilled to have a fully independent inspector general where there’s no conflict of interest. The IG should not be reporting to the Fed chair, which is the way the current law states. The current law says that on anything related to policy, the Fed’s IG should work under the direction and control of the Fed chair. That would be like hiring a management consultant to come in and say, “Well, I’m only going to let you do what I want you to do, and I’m only going to let you have conclusions that are consistent with what I want.”

Then, of course, if that organization has a board of directors or a board of trustees, they’re not going to be very happy with that kind of management consultant coming in. They want an independent set of experts who are going to really take a careful look and call it the way they see it.

Beckworth: It’s important to keep that framework in mind as we think about the work that you’re doing and as we do this conversation today. Now, your original policy brief that generated so much interest was really focused on the labor question that was raised by Elon Musk when he said the Fed was overstaffed. Then in turn, Chair Powell said, “No, we’re overworked,” hence the title of your previous policy brief.

Even though that was the focus and most of your analysis was on that, you also had a section on the renovation of the main Board of Governors buildings in Washington, DC and that seems to have gotten most of the attention. Most of the conversations and interest in our previous podcast and in your policy brief was around that renovation of the buildings.

Palace of Versailles on the Mall

In this newest policy brief, you fleshed this question out a little bit more, right? You get into it more. Andy, one of the questions that I think you’ve been asked, I was asked, is this analogy that you used where the Fed buildings are going to be similar to or akin to Versailles on the Mall, this analogy. Maybe you can help listeners understand why you made this comparison and is it fair?

Levin: Yes, I think it’s an important question because it is important to me to be careful in my work and to be careful in my descriptions, not to exaggerate, not to give careless opinions. Even at the time that I made that comment to a reporter, I had come to that conclusion very carefully. This new brief, it’s shorter and simpler in some ways.

It's just focused on this building project in DC but it’s essentially, I think, making the case that, in fact, the Fed’s upgrade of its headquarters is really akin to Versailles Palace on the National Mall. We’re talking about buildings that are literally just a few blocks from the US Capitol building and the Washington Monument, the Lincoln Memorial, in plain sight. We can talk through some of the details of that if you’d like.

Beckworth: Yes, let’s do that because I know one person pushed back and said, “Look, there are things in this building, asbestos, it’s old. These buildings take a lot of expense to modernize.” How do you respond to that?

Levin: Okay, great. Again, this is exactly what the new brief is about. One important point was that the main building, it’s called the Eccles Building, where the Federal Reserve’s boardroom is, that building was renovated 20 years ago. In fact, I was working there at the time. We had to move to temporary offices a few blocks away for nine months while they were doing the renovation because they were removing the asbestos and updating all the wiring and the plumbing and the furnishings and very comprehensive renovation. 

It’s worth emphasizing that renovation was overseen. It was initiated by Alice Rivlin, who previously had been head of the CBO. Then she was director of OMB at the White House, and she became vice chair. The actual work was carried out under the oversight of Roger Ferguson, who was a renowned expert in management consulting before he became vice chair at the Federal Reserve. Very carefully done, and the total cost was under $30 million at the time. If you adjust for inflation, you’re talking now, current prices, something that might be $50 million or $60 million, not $3 billion.

It’s absolutely true that a building like this needs to be maintained and renovated every few decades. It’s possible that the Eccles Building would need another update in 2020 or 2025. Sometimes equipment wears out sooner than you were expecting, but those are in the orders of millions of dollars, tens of millions of dollars, not billions of dollars.

Likewise, the Fed bought a building next door in 2018. It was the US Public Health Service Building, built around the same time as the Eccles Building. When the GSA transferred the building to the Federal Reserve, the expectation was that the Fed would do a comprehensive renovation. GSA does those renovations to those kinds of buildings regularly. They did one for FDIC 10, 15 years ago. They did one at the US Department of Agriculture Building.

By the way, a lot of us have been paying attention to the FBI’s building, which is a catastrophe, called the Herbert Hoover Building. It was built in the ’60s, poorly designed. The concrete was already starting to fall off the roof of it within a few years after it was finished. Now, I think the FBI is vacating it and they’ll probably demolish that building. That was a disaster.

The USDA building is called the Whitten Building. It’s a beautiful building, also facing the mall on the opposite side, close to the Washington Monument. The GSA renovated that building 2014 to 2018, comprehensive renovation, $30 million to $40 million total bill for renovating a building that’s the same age. That building was also opened in 1930. US Public Health Service, 1930. Eccles Building, 1937. These are all the same generation.

If the Fed had gotten in 2018 what was the US Public Health Service building and it was called Interior South, now it’s called FRB East, and they had spent $50 million, $60 million, $80 million, no one would have questioned it. In fact, they’re spending $1 billion on a building for 1,000 employees. We’re talking about really $1 million dollars per employee for upgrades that added rooftop dining facilities and glass atriums. It’ll be a beautiful building. Waterfall features that literally look—you look at the architectural documents, the architects were looking at Versailles Palace, saying, “Hey, we could do this here.” Fed officials said, “Oh, look, it’s good.”

Beckworth: Now just to be clear, you said $1 billion on this one building, but there’s more on the other buildings?

Levin: Yes. Just to be clear, the whole project, the Fed has four buildings. They’re all essentially adjacent to each other. One of them is a couple of blocks away. Four buildings, and the total cost of those four buildings is $3 billion budgeted in the latest 2024 budget that we have.

Beckworth: $3 billion?

Levin: $3 billion. $1 billion for the FRB East; $800 million for the Eccles Building, which had been renovated 20 years ago; $600 million for the Martin Building, which is across the street; another $500 million or $600 million for the building at New York Avenue, which is a couple of blocks away. $3 billion total for 3,000 employees. Again, what’s remarkable about this, and it’s documented in the brief, is that as of next year or the year after, when the Fed reopens these buildings, the Fed’s headquarters will be among the very most expensive headquarters in the world.

The $3 billion the Fed is spending on this is comparable to Versailles Palace, which actually in current dollars would be about $2 billion to build. It’s about the same amount of money as J.P. Morgan Chase spent on its 70-story headquarters building that’s opening this year in downtown Manhattan, and it’s about the same cost as the Petronas Twin Towers in Kuala Lumpur, Malaysia, which is one of the tallest buildings in the world. 

It’s just amazing, like how can you spend $3 billion? The Fed’s buildings are only a few stories tall, they’re not skyscrapers. It’s really remarkable that this was done with no oversight from Congress, no independent inspector general, no GAO reviews, basically no oversight at all.

Beckworth: All those comparisons are remarkable. The tallest building in the world, J.P. Morgan’s new headquarters. The number, $3 billion, last time we talked it was $2.5 billion, so the estimate’s a little bit higher now?

Levin: Great question. Part of this is because originally, when I was writing the previous brief, it was focused, as you said, on the personnel, and I only realized late in the process that there was something going on with the buildings too. The $2.5 billion is for the three buildings that are adjacent to each other: the Eccles Building where the board meets, the Martin Building across the street, and the new FRB East building that’s adjacent that they acquired in 2018.

When you look at the Fed’s budget documents, in 2020, when they decided to upgrade these three buildings for $2.5 billion, they said, and it’s in writing, they said, “We also need to spend $500 million on the building at New York Avenue to bring it up to the same quality of the interior decor and furnishings that we’re going to have in our three main buildings. Another $500 million. 600 people working in that office building, $500 million, it works out to—it’s about the same, but again, really remarkable.

One other thing that’s actually really fascinating is that there’s an office building, it’s called 101 Constitution. It’s a flagship office building. It’s facing the US Capitol building on Constitution Avenue, right at the end next to the Capitol. It was built 20 years ago at a cost of $150 million. The current assessed value from the city of DC tax assessor’s office is that building currently is worth $360 million.

Some large companies that work there. Names that you would be familiar with are tenants in that building. It’s a beautiful building, $350 million. The Fed’s four buildings, which house about the same number of people as 101 Constitution, are worth 10 times as much as the flagship office building next to the Capitol.

Accountability of the Fed

Beckworth: That is staggering. Those numbers are really remarkable, but help us land the plane here, Andy, circling back to the original motivation for doing this because it’s easy to get caught up in the really stark numbers you just shared with us. Why is this so important, again, going back to the need for an independent IG, for accountability, for protection for the Fed itself?

Levin: I’m a big fan of RealClearPolitics. You open realclearpolitics.com today, one of the headline stories is an op-ed by someone saying the head of the Fed should be fired. The White House should take over the Fed. Now, I disagree with that. In the Constitution—this is the point of the paper that Christina Skinner and I wrote, it’s in a law review—that the Constitution specifies that Congress has the duty to regulate the value of money.

That was very carefully crafted by the founders of the country in 1789, that Congress has the duty to regulate the value of money. It’s not part of the executive branch. Congress has delegated that duty to the Federal Reserve. Congress cannot abdicate that responsibility. If Congress doesn’t oversee the Fed and make sure that these kinds of routine things like buildings and personnel are done carefully, and all the other programs that were mentioned in my earlier brief, and the balance sheet programs, all the rest, if Congress abdicates that responsibility, that threatens the Fed’s independence. Sooner or later, it will blow up.

I think it’s urgent here for Federal Reserve officials to welcome the accountability and to welcome the transparency and to welcome stronger oversight because if they want to protect the independence of the monetary policy, then that’s the only way to do it. We know this from other countries, the countries that have gone way off like Venezuela, where the central bank independence was totally lost.

On contrast, the Bank of England has an independent evaluation office. They have an independent evaluation office. It works a lot like what an independent IG would do at the Federal Reserve. The Bank of England’s leaders welcome having that IEO. They welcome its reports. The IEO reports to an oversight board that’s looking at the Bank of England’s expenditures. This ultimately strengthens the Bank of England. Again, I think that this would be a wonderful time for Fed officials to tell Congress, “We now can see the case for having an independent IG.” That’s the title of the new brief. The Federal Reserve should welcome an independent IG.

Beckworth: We’ll provide a link to that in the show notes for the podcast. Andy, thank you once again for coming on for this bonus episode. We look forward to seeing what conversations are generated by it. Andy, thank you.

Levin: Thanks, David.

Beckworth: Macro Musings is produced by the Mercatus Center at George Mason University. Dive deeper into our research at mercatus.org/monetarypolicy. You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. If you like this podcast, please consider giving us a rating and leaving a review. This helps other thoughtful people like you find the show. Find me on Twitter @DavidBeckworth and follow the show at @Macro_Musings.