Jacob Frenkel
Jacob Frenkel in Jerusalem, June 19, 2013. Photo by Emil Salman
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The next governor of the Bank of Israel will be an old governor of the Israeli central bank – none other than Jacob A. Frenkel, Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid announced on Sunday.

Frenkel last led the Israeli central bank from 1991 to the year 2000. He has spent the last several years, from December 2009, as chairman of JPMorgan International, a subsidiary of JPMorgan Chase & Co.

"I think is the appointment is a surprise on the upside," Rafael Gozlan, chief economist at Tel Aviv-based IBI Investment House, told Haaretz. "The markets will like it, based on Frenkel's status in the world and his experience and familiarity with the Israeli economic scene. I view the appointment as a direct continuation of Fischer's policy."

In between Frenkel and Frenkel, the Bank of Israel was led by the highly respected economics professor and banker Stanley Fischer, who announced his resignation this January, two years before his second term was due to end.

Fischer recently acceded to Prime Minister Benjamin Netanyahu's request that he extend his term through the end of June. However, that date was coming on like a freight train, requiring Netanyahu to make a rapid decision.

It seems that the prime minister's pressure on Frenkel to take the job did the trick, though because of prior commitments, he won't be starting on July 1, 2013, which is when Fischer is moving out. Frenkel will only be starting some weeks later.

Frenkel, 70, earned his BA in economics at the Hebrew University of Jerusalem and completed an MA and doctoral studies at the University of Chicago. He spent five years until 2009 as vice-chairman of the American insurance giant AIG. He had been named to the Bank of Israel in 1991 by Prime Minister Yitzhak Shamir and had been considered one of the central bank's better governors. His resignation in 2000 was took the government by surprise.

Throughout his years in the international finance scene, however, he remained a frequent traveler to Israel, maintaining his close ties with the Israeli political elite and also with his successor, Fischer. This May he delivered a speech at the 13th Herzliya Economic Conference, in which he said that the economic crises plaguing the world were caused by structural problems that couldn't be solved by merely printing money.

At the conference, Frenkel had an enlightening conversation with Axel Weber, today the chairman of the Swiss banking group UBS and formerly the leader of Deutsche Bundesbank, the German central bank.

"We were both formerly central bankers and I personally can say I wouldn't want to be a central banker today, with interest rates at rock bottom, because there's almost nothing that can be done," Frenkel observed. Every central banker knows that keeping interest rates that low isn't sustainable, he added: "That doesn't mean it's a bad policy, but that's not a place anybody would want to be." The Bank of Israel lending rate is now at 1.25%, not quite rock bottom but certainly very low.