Untangling the Mysteries of the Federal Reserve

Filmmaker Jim Bruce (left) and Christopher Gallo, a cinematographer, during the production of Money For Nothing: Inside The Federal Reserve. Photos courtesy of Liberty Street Films.
National Journal
Mike Magner
Sept. 12, 2013, 3:30 p.m.

Most Amer­ic­ans prob­ably have no idea that the lead­er­ship of the Fed­er­al Re­serve is about to change as the in­sti­tu­tion that man­ages the flow of money in the U.S. eco­nomy enters its second cen­tury.

That is a con­cern for Jim Bruce, who hopes to get people — and law­makers — talk­ing more about the power­ful cent­ral bank through his doc­u­ment­ary premier­ing in Wash­ing­ton on Fri­day, Money for Noth­ing: In­side the Fed­er­al Re­serve.

“It’s a trans­ition peri­od at the Fed,” said Bruce, not­ing that Ben Bernanke’s term as Fed chair­man ex­pires Jan. 31 and Pres­id­ent Obama is cur­rently mulling his re­place­ment. “And it’s the 100th an­niversary. It’s a great time for people to be think­ing about and dis­cuss­ing what the Fed should be do­ing. It is greatly in­flu­enced by pub­lic opin­ion, so if pub­lic opin­ion changed the Fed might change.”

Of course, the premise of Bruce’s com­ment — and that of the 104-minute film he pro­duced and dir­ec­ted — is that Fed policies need to change. Money for Noth­ing doc­u­ments the his­tory of the Fed and its re­sponse to crises ran­ging from the bank pan­ic of 1907 to the fin­an­cial crash of 2008. But it sends a clear mes­sage that the Fed, by al­ways keep­ing the spig­ots open for even the ris­ki­est fin­an­cial ven­tures, has cre­ated a boom-and-bust cycle that can’t seem to be broken.

Just take a look at the past dec­ade, Bruce said in an in­ter­view this week. “The first time I no­ticed what the Fed was do­ing was after 9/11, when they star­ted lower­ing in­terest rates ag­gress­ively, and kept do­ing it,” he said. “I was in Cali­for­nia and the hous­ing bubble there was ex­plod­ing all around me. I had a sense they were out of step with what was hap­pen­ing.”

After the 2001 ter­ror­ist at­tacks, the Fed did all it could to keep con­sumers spend­ing while ig­nor­ing signs that many people were over-mort­ga­ging, Bruce ar­gued. The res­ult was a strong eco­nomy for a few years in the mid-2000s, fol­lowed by the biggest fin­an­cial col­lapse since the Great De­pres­sion.

“If you take cred­it for the boom from ‘03 to ‘06, you have to take cred­it for what happened af­ter­ward as well,” Bruce said.

Now Bruce wor­ries that the U.S. eco­nomy could be on the same path, headed for an­oth­er bust even amid signs of a steady re­bound. “We’re about to see the down­side of the boom we just had,” he said.

Bruce, 38, grew up in New Jer­sey, stud­ied film at Middle­bury Col­lege in Ver­mont, and spent a year as a pro­fes­sion­al hockey play­er in Europe. When he re­turned in 1997 he went to Cali­for­nia and broke in­to the in­dustry as an ed­it­or, work­ing on sev­er­al films be­fore be­com­ing ed­it­or, writer and cop­ro­du­cer of an award-win­ning doc­u­ment­ary, Si­erra Le­one’s Refugee All Stars, in 2005.

Money for Noth­ing is Bruce’s first film as dir­ect­or. He said his goal was to em­power people by help­ing them bet­ter un­der­stand an in­sti­tu­tion shrouded in mys­tery.

“The Fed is sup­posed to in­volve us,” he said. “The Amer­ic­an people should be think­ing about what this agency does. I hope the film will cre­ate some de­bate.”

With that in mind, Bruce ended the doc­u­ment­ary with a pro­voc­at­ive state­ment, as nar­rated by act­or Liev Schreiber:

“More than ever in its 100-year his­tory, the Fed­er­al Re­serve holds the fu­ture of our eco­nom­ic sys­tem in its hands. Can the Fed help foster an eco­nomy that’s built to last, one not based on stock or hous­ing bubbles, but on sens­ible pro­duct­ive in­vest­ments that will en­rich not just some of us, but all? Or will it con­tin­ue to of­fer the empty prom­ise of money for noth­ing?”

Money for Noth­ing opens Fri­day for a week-long run at the Land­mark E Street Cinema, 555 11th Street NW in Wash­ing­ton, and opens in New York the same day. It will play in Los Angeles start­ing Sept. 20.  

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