The Fed's White Elephant

Eighteen years ago, the Federal Reserve System broke from its stodgy tradition by building a futuristic glass-and-steel headquarters for its district bank in Minneapolis. Now that decision is coming back to hauct it.

The dazzling 11-story landmark is plagued by structural flaws that could end up costing the Fed more than four times the original, $30.9 million price tag.

The problem leaves the central bank with three options, each of them expensive, two Federal Reserve Board governors told Congress last week.

It could repair the building's assorted problems - corrosion, leaks, fire hazards, and asbestos - at a cost of $120 million to $150 million. It could construct a new headquarters, which would cost about the same. Or it could buy or lease new space, which might be cheaper but is considered less likely to be the choice.

"This is very painful to us," Governor Wayne D. Angell told the House Banking Committee's domestic monetary policy subcommittee, which oversees the Fed's budget. "We will do everything to diminish the chance of anything like this happening again."

The House subcommittee's chairman, Rep. Stephen Neal, D-N.C., expressed dismay: |The troubling thing about it is that it happened at all. We're used to you being competent and all, and it just doesn't look good."

Services May Get Costlier

The Fed's bank activities committee, chaired by Mr. Angell, next month will consider the Minneapolis Fed's request to build, buy, or lease a new facility. The Board of Governors will have to rule on the committee's recommendation. Whatever the decision, the reserve bank's customers are likely to be pinched by higher costs for priced services, Mr. Angell said.

"Somewhere after 1995, that building will be clearly uneconomical for our operations," Mr. Angell said in an interview. He stressed that inspectors have found the building to be structurally safe and sound for now and that employees are in no danger.

But he added, "No one's willing to sign off on the view that 15 years from now, everything's going to be okay."

Design Poses Problems

The problems apparently lie in the building's unusual design, which is a marked departure from the Fed's usual white marble palaces. The structure hangs like a suspension bridge from two steel towers.

A pair of cables draped between the towers carries the weight of the floors, aided by a truss that connects the towers. A network of vertical cables and steel beams add strength.

The building rises above a 2.5-acre plaza, below which lies a three-story complex that employs the same design principle. The vault and other high-security operations are housed there.

Wide-Open Spaces

Architect Gunnar Birkerts' design created "a very delightful-looking building," Mr. Angell said. Unobstructed by columns, each floor measures 275 feet by 60 feet.

Though the building was constructed exactly to design, problems began to crop up immediately. The vast wall of glass that lies flush with the building face was ill-suited for the chilly Minneapolis winters. Wide temperature swings caused the building to sweat - moisture condensed and caused leaks. One patchwork repair led to another.

Supports Are Rusting

On an inspection tour, Mr. Angell said he crept through crawl spaces for a closer look at the structure. He found corrosion and rust forming on the steel hangers that help support the building.

"A real pain hit me in the belly," he told the House banking panel. Here is what the inspection turned up:

* The curtain wall and glass panels are unstable. "There's more movement that the architect anticipated," Mr. Angell said. "To fix the building, the curtain wall would have to come off. The building has to be taken back to its skeletal form.

* The unusual design produces vertical airflows. "It creates a flue effect if we ever get a fire," said Fed board member Edward W. Kelley Jr., who also testified at the House hearing. In other words, smoke and flames could rush up through the building, like fire through a chimney. That poses "very severe life safety concerns."

* Asbestos is throughout the building. "It isn't just on the ceiling - it covers the water pipes" because the building has "a peculiar cooling system that involved groundwater," Mr. Angell said. The asbestos doesn't pose a constant health threat, said Chris Powers, a spokeswoman for the Minneapolis Fed. "But once the ceiling panels become disturbed, we have a problem."

Mr. Angell said he has been aware of the problems for about five years, but it is probably too late to sue the design team. Mr. Birkerts, the architect, said he was aware of the problems. But he maintained that the building was not beyond repair. "It just needs to be upgraded," he said.

Burst Pipe Damaged Mainframe

The problems came to a head in April, when an asbestoslined water pipe burst above the third floor, damaging the mainframe computer that handles wire transfers and automated clearing house transactions. The operations were moved to the Fed's backup site in Culpeper, Va.

Until that catastrophe, Mr. Angell said, the Fed was taking a wait-and-see attitude. That changed fast. Mr. Angell said he started to think, You can put this off and put this off, but are we saving money by putting this off?

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