Three Documentaries on the Federal Reserve

by Nomi Prins

Editor's Note: This sidebar appears as a supplement to Nomi Prins's feature article in our print edition, Dollars and Sense: New Documentaries on the Financial Crisis, which surveys a broader span of documentaries on the current economic meltdown. The issue is available on newsstands and in bookstores currently and can also be shipped as the first issue of a new subscription.

Several of the documentary films reviewed in this article briefly touch on the power of the Federal Reserve, notably pointing toward problems that arose from former Federal Reserve Chairman Alan Greenspan’s dramatic reduction of interest rates leading up to the subprime and general debt bubble. But today the Fed, now headed by Ben Bernanke, poses an even greater danger to the future stability of our financial system. To bail out the banking industry from its own mistakes, the Fed has provided it with nearly $8 trillion worth of various loan facilities (pawn shops for banks) and other kinds of cheap financial assistance. It has done so in a highly clandestine manner and has so far refused to publicly disclose any information about the nature of those loans, the banks that received them, or the quality of what is, most likely, very questionable collateral posted in return. Nevertheless, both the Bush and Obama Administrations have proposed to give the Federal Reserve even more power.

     Such secrecy is not unusual for the Federal Reserve, which most Americans are unaware is not so much a full-fledged federal agency as it is a consortium of private banks, which serve as the nation’s central banking system. The current and forthcoming documentaries on the economic crisis do not include any films focusing on the role of the Fed, although arguably there has never been a greater need for a compelling film that examines not only the Fed’s power, but also the link between that power and the economic pitfalls it creates for Americans. My new book, It Takes a Pillage: Behind the Bailouts, Bonuses and Backroom Deals from Washington to Wall Street, attempts to look at this very issue.

     Two important documentaries on the Fed, both produced in the Nineties, shed light on our current situation. Masters of the Universe: The Secret Birth of the Federal Reserve (1999), which is part of a five-part series called Conspiracy: The Secret History, examines the conspiratorial nature in which the Fed was born, a meeting of the world’s most influential financiers that took place on Jekyll Island, Georgia in 1910.

     Produced by investigative journalist Daniel Hopsicker and featuring a distinguished group of authors and thinkers, the film questions why the mainstream media don’t really delve into the problems stemming from the secretive role of the Federal Reserve and other powerful financial groups that meet clandestinely. This would be a meaningful debate to bring up in today’s environment. There is a credible element of intrigue conveyed throughout the film, depicting the ultimate crime to “rob every bank vault in America all at the same time,” leading to the Federal Reserve Act of 1913, that President Woodrow Wilson signed, but instantly regretted

     The second documentary, The Money Masters, is simply outstanding. Directed and narrated by Bill Still, it does a superb job of revealing the truth behind the Fed and the powerful global financiers whose self-interest has dictated our banking system from the beginning. One gets the feeling that, had there been a larger budget for this film, the rather drab and grainy production values might have been improved. But if you can get past the low-budget style, you’ll find the content extremely compelling.  Indeed, I would recommend that every member of Congress watch this film immediately. It would provide a thorough understanding of what needs to be done in order to curtail the Fed’s role in this crisis and its aftermath. As Still explains, there is nothing “federal” about the Federal reserve, and there are no reserves, the very name is a deception to make Americans think that America’s central bank operates in the public interest, although it is really a private bank owned by private stockholders and operated purely for their private profit. From this starting point, the film’s argument unfolds magnificently.

     The Money Masters provides a fascinatingly researched history of the Federal Reserve, in all its secrecy and power. Where Masters of the Universe relies on interviews and historical footage, The Money Masters does a much more thorough job of developing the point of just how powerful the Fed is. It also uses historical footage, but it juxtaposes photographs and clippings with solid reporting that takes us into Congress, not just with respect to Fed-related legislation, and its history, but also of the powerful lobbying role that the Wall Street banks played at the time the Fed was born. The Money Masters shows the symbiotic relationships between the Fed and all the major banks and their leaders, lobbyists, and policies. Its conclusions about history are equally relevant today, and suggestions to resolve our current problems are located on The Money Masters Web site at http://www.themoneymasters.com

     Still discusses how the debt-based banking system, which stems from the Fed, impacts people in their everyday lives. It effectively explains economic concepts such as “fractional lending,” “easy and tight money,” and “inflation,” explaining how they are affected by Fed decisions about interest rates and money supply, and how those decisions affect people and the rates on their loans. Still declares that a primary problem of our financial system is that all of our money is based on government debt. The United States Treasury department issues Treasury bonds in order to raise money to pay for running the country (the Treasury pays interest on these bonds, just like you pay interest on your mortgage debt). It loans these bonds to the Federal Reserve, and the Federal Reserve uses them as collateral against which it prints new money. In addition, the Federal Reserve prints money against reserves that banks put up as collateral, but for every dollar a bank puts up as reserve, it can borrow nine from the Fed, effectively money created from nothing. All the money in the system is backed by Treasury or bank debt. Today, of course, we have an abundance of that, compared to when the film was produced. He wisely notes that paying off our national debt  (which we are far from doing), without reforming our banking system, is impossible. 

     The film further contextualizes its discussion of the Fed by providing a history of money since the American Revolution, a war that initiated the U.S. debt problem. The primary issue leading to the revolutionary war, Still explains, was Great Britain’s prohibition of the American colonies from issuing their own paper currency. And, as Thomas Jefferson prophesized, “If the American people ever allow banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.” Jefferson wasn’t too far off from predicting precisely what is unfolding several centuries later.

     A more recent documentary, Zeitgeist Addendum (2009), a sequel to Zeitgeist, reviewed in our Winter 2008 issue, strives to put forth an epic message about the corruptive powers of money and the need for collective action. The film’s opening sequence offers a very clear illustration of how the Fed prints money and aids the banking system in creating piles of debt based on very little real collateral. The format is reminiscent of the kind of film you'd see in a high-school classroom—dry, preachy, but still quite informative.

     If it had stayed with the money angle, the film would have made a solid contribution by explaining the esoteric workings of the Fed as the most secretive arm of the government and Wall Street combined. Unfortunately, about a third of the way into the two-hour film, it begins to meander uncomfortably into too many tangents, including religion, the mythical representation of the death and resurrection of Christ, comments from Carl Sagan on how extraterrestrials would view earth, and so on. 

Cineaste,Vol.XXXIV No.4 2009

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