An Insider Account of the COVID Financial Crisis.

• Author: McKinley, Vern
• Position: Surprised Again!: The Covid Crisis and the New Market Bubble

Surprised Again! The COVID Crisis and the New Market Bubble

By Alex J. Pollock and Howard B. Adler 224 pp.; Paul Dry Books, 2022

Previously in Regulation, I wrote that we could soon see a steady flow of books on what might be called the COVID financial crisis. (See "Will We See Another Bumper Crop of Financial Crisis Books?" Spring 2021.) I have since reviewed two books that could be placed in that category: Trillion Dollar Triage by Nick Timiraos ("Was It Really Triage?" Summer 2022) and Permanent Distortion by Nomi Prins ("Collecting Evidence on Central Banks' Distortions," p. 48).

Alex Pollock and Howard Adler have now contributed what I consider the first "insider" account of this crisis. Pollock worked at the senior management level of the Treasury Department's Office of Financial Research (OFR) from 2019 to 2021, and Adler was the deputy assistant secretary of the Treasury for the Financial Stability Oversight Council (FSOC) from 2019 to 2021. Pollock has two books to his name focused on financial stability topics, while this is Adler's first book.

The element of surprise / Surprised Again! is a follow-up to one of Pollock's previous books, 2018's Finance and Philosophy: Why We 're Always Surprised (Paul Dry Books). In the new book's first chapter, the authors cite Pollock's prior book and explain their rough rule-of-thumb that "financial crises occur on average about once a decade." They then explain how in 2019, as they began to dig into their new duties at Treasury, they calculated that it had been about 10 years since the previous crisis and they put their heads together to compile "a long list of various macro-financial worries" that might trigger the next crisis. This made sense given that their responsibilities in their positions at OFR and FSOC included "anticipating] possible future financial crises." Interestingly enough, the authors admit that "the emergence of a new pandemic was certainly not on the list of financial risk factors."

Pollock and Adler note an example of a well-known economist who they claim was surprised by the crisis. In 2017, amid her term as Federal Reserve chair, Janet Yellen commented about the next financial crisis: "I do think we are much safer, and I hope it will not be in our lifetimes. And I don't believe it will be."

One thing I believe the authors should have addressed here is the elements of a "financial crisis"--a term the authors use quite often but do not formally define. They merely conclude...