Coming into Davos, with the world seemingly on edge, the biggest cry was for coordination from the “authorities,” but to judge from the noises coming from the Europeans yesterday, that isn’t likely if what you are hoping for is rate cuts soon.

ECB chief Jean-Claude Trichet was in no mood to budge on the fight against inflation. The absolute best illustration of the huge split over what central banks should do was Trichet’s reception in the hall after his panel.

OECD chief Angel Gurria and former Italian finance minister Domenico Siniscalco greeted Trichet with hugs of encouragement for not bowing to calls for interest rate cuts.

But then up marched an angry business representative from his native France who asked the central bank chief if he wanted to see European industry leave the continent. “I take note,” Trichet said, making no commitment.

Who knows though, if the thinking of some who believe the Fed was hoodwinked into cutting due to misinformation, the ECB’s course may be fully vindicated.

The story, as it is being told, is that the Fed’s inter-meeting cut was an unintended consequence of the $7 billion Societe Generale fraud scandal. Soc Gen discovered the fraud, by an equities trader, over the weekend and was a forced seller of enormous positions on Monday, as it sought to close out unauthorised trades. This huge dumping of equity exposure fuelled the downdraft in European and global share markets, as did the rumours of a bank in trouble.

If then the Fed was cutting because it was spooked by equities market, it was in part reacting to a false signal. The Fed has said it was not aware of Soc Gen when it made its decision.

My best guess, and that is all it is, is that the Fed was only in small part reacting to equity falls. If you want to look for a skeleton in the closet spooking the Fed, look at the monoline insurers, whose vulnerable situation threatens write downs on up to $2.4 trillion of structured and municipal debt. That puts one rogue trader in the shade.
James Saft is a Reuters columnist. The opinions expressed are his own.