Trichet's Bat Cave: ECB Head Ready for Disaster,
It sounds funny when you stop to think about it; Jean-Claude Trichet hiding out in his ECB bunker as the monetary shit hits the fan with his direct line to Ben Bernanke (as if somehow that will save him). Go Bloomberg, and thanks for the laugh this morning:
Thirty-five floors above Frankfurt’s financial district, European Central Bank President Jean-Claude Trichet has transformed his office into a crisis command center.
Sitting at his L-shaped wooden desk, Trichet can punch a button on a white telephone to contact any of the 20 other men and one woman who help him set monetary policy for nations ranging from Germany to Malta. Nearby is a row of six handsets for ECB Executive Board members to use at the first sign of financial trouble. Inside a pocket of Trichet’s charcoal-gray double-breasted suit rests a mobile phone programmed with a speed dial for U.S. Federal Reserve Chairman Ben S. Bernanke. On the other side of the room, below an antique map of Europe, stands a satellite phone he’ll use if everything else fails.
“We utilize all possible and appropriate means of communication,” Trichet, 66, says on a wet June Monday after chairing a board meeting of the bank he has led since 2003. “We have to remain alert permanently; we are in uncharted waters.”
The task of navigating the 16-nation euro region out of recession may require Trichet to abandon his consensus-building ways as he tries to persuade European banks to lend again. His ability to control the fate of what is effectively the world’s second-largest economy is limited compared with the powers held by Bernanke or Alan Greenspan, Bernanke’s predecessor at the Fed.
As far back as 2005, the Frenchman was warning of a looming financial disaster triggered by credit deals that few people understood. His concerns were dismissed by bankers convinced that the mania for cheap cash carried little risk.
FT claims Trichet is practically skipping around Jackson Hole this weekend as Ben Bernanke bemoans the recovery everyone is still waiting for proof of and frankly that is entertainment in and of itself:
To the surprise of many, Germany and France, the eurozone’s two largest economies, have emerged from recession before the US. Gross domestic product rose in both countries by 0.3 per cent in the second quarter, compared with the previous three months, according to data last week.
The ECB may well feel its strategy, perhaps best summed up as “cautious but pragmatic”, has been vindicated. It eschewed what it saw as fancy academic notions – for instance, the idea that radical action was justified to avoid highly unlikely, but potentially disastrous, outcomes. But it nevertheless cut interest rates faster and further than ever before, and pumped hundreds of billions of euros into the eurozone banking system.
Still, as he listens to this weekend’s discussions, Mr Trichet will be aware of the ECB’s limited control over events. Jackson Hole, which will be attended by at least three other ECB governing council members, offers a chance to review lessons learnt over the past two years, and consider how central banking should evolve. There is no shortage of issues for the ECB.
Trichet doesn't deserve the credit for Germany. He does, however, have the right to shoot Bernanke a dirty look or two while he's hanging out in Wyoming. Just sayin...