What If There's Another Financial Crisis? Washington seems unprepared.

• Author: Pethokoukis, James

What will ignite the next conflagration that scorches global economies and financial markets? There are lots of obvious candidates: A surprise rise in interest rates after years of quiescence. Another European sovereign debt crisis, perhaps centered around Italy. A sharp downturn in the Chinese economy as the trade war with America escalates. Or maybe it will be a true black swan, a highly improbable event that hardly anyone is considering right now-but will make some sharpie a billionaire multiple times over.

The only thing absolutely for sure is that more financial shocks will come-and probably not infrequently given the track record of the past few decades, from the Latin American debt crisis of the 1980s to the Asian financial crisis of the 1990s to the housing and banking crisis of just a decade ago. And when the next crisis comes, which Americans will be there to save the world? Back in 1999, Time magazine ran a cover story with the picture of Federal Reserve Chairman Alan Greenspan, U.S. Treasury Secretary Robert Rubin, and U.S. Treasury Undersecretary Lawrence Summers, labeling them the "Committee to Save the World" for their financial fire-fighting prowess. It was a team of great experience, industry and political connections, and intellectual capacity.

But as certain as it is that another crisis will happen, it might be equally uncertain whether Washington is prepared to act effectively and efficiently. The current Fed chair, Jerome Powell, does not seem to have the confidence of the Trump White House and could be replaced in a second term by a highly unorthodox selection. The current Treasury Secretary, Steven Mnuchin, seems to have the support of the president, more or less, but maybe not that of financial markets. And the Treasury Department itself still has key positions left vacant or filled with lightly qualified appointees compared with previous administrations.

Now on paper, at least, there were few people better suited than former Fed Chair Ben Bernanke to lead America's central bank through a global financial shock and near depression. Bernanke was a student of the Great Depression who understood how monetary policy could either ameliorate or aggravate a crisis. And while the Bernanke-led Fed's policy creativity during the downturn and crisis-especially the multiple rounds of bond buying-have been criticized by some, not only did the American economy stay out of depression but the subsequent recovery is now part of the longest expansion since at least the 1850s.

Current Fed Chair Jerome Powell was not at the Fed during the heart of the crisis...