Global Economics

The Director of Money for Nothing Reveals Not Quite All


Alan Greenspan, former Chairman of the Federal Reserve, in a scene from the documentary Money For Nothing: Inside The Federal Reserve

Photograph by Britt Leckman; Courtesy Liberty Street Films

Alan Greenspan, former Chairman of the Federal Reserve, in a scene from the documentary Money For Nothing: Inside The Federal Reserve

I just interviewed Jim Bruce, the writer and director of Money for Nothing, a harshly critical documentary on the Federal Reserve that premieres in New York and Washington today. Judging from the early screening I got, it’s safe to say that Alan Greenspan and Ben Bernanke won’t be lining up outside the E Street Cinema to get the best seats in the house. The Fed comes across as a serial bubble-blower that helps Wall Street at the expense of Main Street. It’s a familiar but expertly made accusation that features interviews with a couple of dozen VIPs—including Fed Vice Chair Janet Yellen, who may become chairman next year.

Money for Nothing uses all the tricks of financial crisis documentaries: Ominous music, aerial shots of Manhattan, archival clips of a frothing Jim Cramer, and a voice-of-God narrator—in this case, the ultrasmooth Liev Schreiber. In fact (shameless plug alert), it looks superficially a bit like Bloomberg Businessweek’s own movie, HANK: Five Years from the Brink, which is available on Netflix starting Sept. 16.

Inevitably, Money for Nothing will get sucked into the debate over whether the Fed should announce on Sept. 18 that it’s going to start tapering its $85 billion-a-month purchases of Treasury bonds and mortgage-backed securities. I asked Bruce what he had to say about that. (Everyone else has weighed in—why not a filmmaker?) Yes, he said, the Fed should start backing down from quantitative easing. “The Fed sort of promised things they shouldn’t have,” he said. “They’ve set themselves up for a fall. It’ll be painful, but to me, I think, the sooner the better.”

I asked Bruce if he supports shutting down the Federal Reserve on the eve of its 100th birthday and going back to the gold standard. After all, a clip of a Ron Paul rally appears toward the end, and Jim Grant, a writer who favors the gold standard, has some of the movie’s best zingers. “It’s definitely not an end-the-Fed movie,” Bruce said. “What Ron Paul represents is lack of trust in the Fed. We’re trying to walk a very fine line in the film. There’s some decent part of the population that agrees with Ron Paul. We sort of had to have his voice in there. To me, it’s a cautionary message for the Fed: ‘If we keep reaching to do these things that we really can’t do, we’re going to lose people’s trust.’”

One reason the Fed is taking such extreme measures is to offset tight fiscal policy by Congress. The shrinkage of the federal budget deficit, while essential in the long run, is subtracting from the economy’s current growth rate. That point isn’t made in the film. I asked Bruce about it. “I definitely agree with Ben Bernanke and sympathize with him when he says Congress isn’t doing its part. My take is that congressional spending is extremely poorly targeted and Congress could do so much more.” Bruce just doesn’t think quantitative easing is the right response.

The movie creates an impression of more unanimity than actually exists among the experts who appear on camera. Alan Blinder, a former Fed vice chairman, and Janet Yellen, who has that job now, come across as part of the crew that’s critical of the Fed even though both support the central bank’s current easy-money policies. Why? I asked. Part of it is the need for a simple, clear message, Bruce responded. “There’s all these different voices, and you can’t sync all their viewpoints,” he said. He said he thinks Yellen does agree with the movie’s warnings against letting bubbles get too big, although he admits she probably has a different idea of how big a bubble is too big.

My last question to Bruce was about why few defenders of current Fed policy appear in the film. He said Paul Krugman—who has his own beefs with the Fed—had agreed to appear, but “we couldn’t get the scheduling to work. He would have been an interesting voice in the work, absolutely.” Eric Rosengren, the president of the Federal Reserve Bank of Boston, was interviewed but was left on the cutting-room floor. Two reasons for that, Bruce said. First, “the subject matter is so complicated that you almost need for people not to be totally confused. People would just be left scratching their heads” if they had to wade through disagreements among interviewees. Second, he said, Rosengren’s views “were so similar to Bernanke’s that I felt like it was almost redundant.”

Bruce gets the last word: “People hear the conventional wisdom coming from the chairman and very little else. I felt like, to my mind, conventional wisdom really failed. I’m making this film because I feel like conventional wisdom is going to fail us again.”

Coy_190
Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.

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