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If Greenspan was the head of the G30, would one then wonder if the G30 is a proper institution to impulse change in banking legislation and monetary policy, at a time when we're grappling with the legacy of the financial crisis? Probably, one would wonder, but, in reality, no wonder, because Trichet is chair of the G30. But then, did Trichet do such a better job than Greenspan? Economic historians are the final authority on this sort of legacy, but, until they render their judgment, it's open for discussion.

Dean Baker, a recipient of the Revere Award for correctly predicting the crisis, and  Paul Krugman, said  that Trichet's track record as a central banker, while "fixated on 2% inflation", is a also disaster. Arguably, the crisis started in the US, and he was spared the sort of public outcry that a congressional inquiry broadcast on TV can sometimes generate. That explains, perhaps, the difference of perception. This said, Trichet has an ally among economists of the same league, Nouriel Roubini.  In the relevant interview, however, he doesn't really justify his positive opinion, except for acting on the crisis "ahead of the curve" (in August 2007!).

Let's look back at some aspects of his tenure.

Jean Claude Trichet attended the same conferences as Greenspan (Jackson hole). So, just like him, he must have heeded the BIS' repeated warnings of a mortgage crisis in the US1,2. Due to the interconnectedness of world markets, it should have been expected that the shock wave would spread to Europe, as the turn of events now demonstrates.  Besides, there was housing bubble brewing in Spain and Ireland, under his watch and jurisdiction. This scenario was foreseen by one of the foremost experts on European monetary policy in 1998, as related in op-ed in the FT.

In a 2004 speech, Trichet credited the Stability and Growth Pact for Ireland's seeming economic success, explicitly dismissing those who recommended a federal budget (subtext: to offset asymmetric responses throughout the Euro zone in the event of a major economic/financial shock, that's standard OCA theory). Retrospective research has shown that the majority of  US economists advised against the creation of the Euro. Trichet doesn't seem to have recognized that there was a problem with the Euro, until it translated into a nightmare.

Notes

1. In earnest, we say 'BIS warnings' as a simplification. The BIS, as an organization, heeded the warning of its top economist. As of June 2006, their forecast was  "The best bet for next year is that strong, non-inflationary growth will continue". 
2. In a December 2006  document  whose raison d'être is to play a role in preventing financial crise the ECB forecast for 2007 was that the financial system would remain in "healthy condition and the economic outlook favorable". In the detail, the document correctly analyzed "Potential housing market correction in the US" (Box 2), but it was not singled out as a major source of risk.

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