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 “anticipat[ing] 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 that, yes, we did indeed experience a financial crisis in 2020.

In their discussion of the surprising nature of the crisis and subsequent bailouts, the authors claim that the authorities were surprised and, “in common with the last crisis, the governments and the central banks had no choice but to fly by the seat of the pants, making it up as they went along.” Informed by my own work experience and research, I would disagree that the financial authorities “had no choice” when it came to undertaking a round of massive bailouts for nearly every segment of the financial sector.

Bagehot, really? / Pollock and Adler argue in an early chapter that the 19th century English financial writer Walter Bagehot developed “the classic guide for curing a panic in process, like the one in full bloom in March 2020.” (See “Would Bagehot Be Smiling?” Winter 2019–2020.) They summarize his methodology as follows: “Central banks should lend early and freely (i.e., without limit), to solvent firms, against good collateral, and at high rates.”

The chapter goes on to describe in prose and through graphs the Treasury’s individual emergency programs (22 of them during the pandemic); the record federal deficit ($3.1 trillion); the explosion of the Federal Reserve’s balance sheet (from $3.8 trillion to $8.5 trillion); the Fed’s supporting emergency lending programs, some off‐​the‐​shelf and some new (14 of them); and how market interventions affected the monetary aggregates such as M2 (the sum of checking and savings accounts plus quickly liquidated assets), which went from less than $16 trillion to over $20 trillion. They conclude that “aggressive expansion of elastic currency worked to stem the financial panic, as Bagehot said.” A chapter near the end of Surprised Again! recounts how central banks worldwide followed this same script.

I would disagree with Pollock and Adler’s implication that all the recipient firms were solvent (or more rightly “sound,” the term Bagehot uses more often in his 1873 book Lombard Street), held good collateral, and were charged sufficiently high penalty rates. Unfortunately, the authors do not do a deep analysis of the firms and show whether their characterization or mine is correct.

What do these industries have in common? / The authors then transition from the big‐​picture view of the programs and the massive numbers behind the interventions, to the industry‐​level effects. They dedicate well over half of the book (chapters 4–11) to a deep dive into the individual sectors of the financial industry that changed the most dramatically—for better or worse—during the response to the COVID crisis: money market funds, the financial markets (rightly referred to by the authors as “the everything bubble”), cryptocurrencies, banks, the mortgage market, municipal debt, pension funds, and student loans.

For each of these topics, Pollock and Adler give background on the sector and how the 2020 panic played out and the response of the financial authorities (mostly bailouts either direct or indirect). An assessment of each of these diverse sectors is beyond the scope of this modest‐​length book review. The authors’ explanatory graphs integrated into select comparisons with the analogous interventions in these sectors during the great recession a decade previously and the transition to bubble territory make clear the excessive nature of the interventions. It was truly a case of no major financial market sector left behind in the responsive measures.

A disappointing closing / There is a lot of useful information and data in this book, and it compares favorably with the information and data in the other two books I cited at the beginning of this review. Pollock and Adler make references throughout the book to their audience, using the complimentary monikers “thoughtful reader,” “informed reader” and “candid reader.” As someone who hopefully falls into those categories, I will have to admit that I was disappointed with the closing of Surprised Again!

The authors conclude with a chapter presenting reflections on the crisis and the response by the authorities, followed by an epilogue. Given the rapidly changing financial sector environment, they felt the need to inform readers that the manuscript for Surprised Again! was completed in early February 2022, but an epilogue was added to discuss the continued evolution of the sector and provide a snapshot of the industry as of mid‐​May 2022. Informed readers will note that many of the bubbles created in the described sectors continued to deflate throughout the remainder of 2022 since the release of the book, in particular the crypto and mortgage markets.

The authors are quite critical of the present state of the financial sector throughout the book, especially the seemingly endless cycles (again, timed roughly every 10 years or so) of serious financial crisis. Typically, these final chapters would be dedicated to a number of solutions to this conundrum. But the authors do not suggest cutting back on bailouts. The previously noted reflections only summarize how deadly the pandemic was and then enumerate a few scenarios that could unfold to trigger the next crisis: another housing collapse, a malicious hack of the financial system, an electric system failure, another pandemic, a major war, a combination of the above, or none of the above. This assessment is quite speculative, especially because—as the authors point out—almost no one predicted that a pandemic would trigger a financial crisis in 2020. Where, thoughtful, informed, and candid authors, are the solutions?

At the beginning of the review, I stated that I would classify this book as an insider account, but Surprised Again! has a dearth of the typical insights of that genre and provides few surprises for an informed reader. A skim through the endnotes reveals material that a non‐​insider could have just as easily unearthed and drawn on in composing such a book. Presumably, the authors were in the thick of the response to the financial instability during 2020 at OFR and FSOC, but I don’t recall reading any blow‐​by‐​blow descriptions of critical meetings or seat‐​of‐​the‐​pants analyses that are so typical of insider accounts. Pollock and Adler do point out that those agencies never cited a pandemic as a potential trigger for a crisis, but how do they grade the overall response from Treasury (where they worked) and the Federal Reserve (whose actions they no doubt observed during that period)? They do not say.

The assumption underlying the creation, as part of the Dodd–Frank Act reform measures, of the two government creatures the authors worked for was that collectively the financial authorities—armed with sufficient resources—could scan the financial sector and pinpoint the genesis of the next crisis. How wrong that turned out in relation to the 2020 pandemic! Are the financial resources that are sunk into OFR and FSOC ($75 million annually at last count for OFR and $13 million annually for FSOC) money well spent given the evidence of what seems to be a losing battle to predict the next financial crisis? Is the research coming out of OFR under the direction of FSOC useful? Did it help during the financial crisis in some way? Again, even with their insider knowledge, the authors do not say. Given their vantagepoint at Treasury—which is highlighted on the book’s back cover, on the publisher’s website, and on the book’s Amazon page—this reader hoped for more of these classic elements of an insider account.