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Afraid of the Public Outcry: Netanyahu Averts Nay Vote on 'Tycoon Haircut' Law

The Ministerial Committee for Legislation realized earlier this week that the bill did not command a majority in the cabinet or Knesset.

Prime Minister Benjamin Netanyahu has postponed the Knesset's first vote on a bill that would block any company that has failed to fully repay bonds from issuing more bonds until it pays in full, for fear that it would fail.

The bill is sponsored by MK Meir Sheetrit (Kadima ).

Benjamin Netanyahu - Emil Salman - 23.11.2011
Emil Salman

The Ministerial Committee for Legislation realized earlier this week that the bill did not command a majority in the cabinet or Knesset.

Before the scheduled vote on Wednesday evening, Sheetrit called on Netanyahu from the Knesset podium and said, "If you lent somebody money and he didn't pay you back, would you lend him money again?" After that, Netanyahu halted the vote.

It was agreed that the Finance Ministry would revisit its opposition to the bill. It hasn't explained why it opposes the idea.

Sheetrit, a former finance minister himself, proposed that any company that has failed to fulfill its financial obligations to the public would be barred from raising more capital until it meets its obligations. Even if the public agrees to give the company more time to repay, it would be unable to tap investors again until it pays in full.

At present there is no legal constraint preventing a company from borrowing from the public again, even if it is in a state of default on bond debt.

In his address to the Knesset before the aborted vote, Sheetrit accused institutional investors of groveling before big business.

"They charge the public billions of shekels in management fees but when it's time to protect the people's money from the tycoons, they vanish. Who bought those bonds from Delek Real Estate?" he asked, referring to a company owned by Yitzhak Tshuva that is proposing a radical haircut for bondholders - they stand to lose about half their money.

The institutional investors are the ones that bought Delek Real Estate's bonds, Sheetrit said, but when the companies fail to repay, they just tell the public that "everything will be all right."

He then read out a list of executives at provident and mutual funds and how much they earn - which comes at the public's expense.

"At Menora Mivtachim, the manager gets paid NIS 5.8 million a year. Eyal Lapidot at Phoenix gets NIS 11.4 million a year. David Baruch at Excellence gets NIS 4.4 million a year and Yuval Cohen from Migdal gets NIS 7 million a year," Sheetrit said.

Carmel Shama-Hacohen (Likud ), chairman of the Knesset Finance Committee, applauded Netanyahu's move to postpone the vote, saying it was a clear message to the tycoons that the rules of the game may be changing.