Accountant General Shuki Oren is said to be among the most level-headed of the treasury's senior officers, with a proclivity for diplomacy. But yesterday he chose some blunt words in his criticism of initiatives that have been bruited about to help corporate Israel, mainly its biggest borrowers, weather the economic storm lashing the globe.

Zohar Goshen, chairman of the Israel Securities Authority, suggested a state guarantee for corporate bonds. Institutional investors (provident funds, insurance companies and pension funds) would buy new issues of bonds and place them into a special fund. The state would insure that fund against any drop in value greater than 20%. That, said Oren, amounts to bailing out the business barons at the expense of the ordinary citizen. It would help magnates struggling to make good on their debts to bondholders and banks, without requiring them to give anything meaningful in return.

He believes that both the lenders and the borrowers have to share the pain.

"Tycoons will have to give up some, and perhaps all, of their shareholdings. Any other option would constitute bailing out both institutional investors and tycoons at the expense of Israeli taxpayers," Oren said.

Nevertheless, there is a powerful lobby pushing Goshen's proposal, Oren warned.

Institutional investors want to be extricated from their debts, and the people who own the companies that borrowed the most from bondholders also want relief, without paying any price. "The cost to the economy could be insane," Oren says.

The problem is that both sides fail to grasp the savage reality. Institutional investors are convinced that they'll get all their money back. They are therefore doing little to address bad debts.

Meanwhile, company owners cling to their confidence in their companies. As a result they have adopted the position that their debts should be spread out, at no cost to themselves.

Neither of these positions is viable, says Oren.

"Yes, the market must be allowed time to take advantage of the tools that we have provided, and must be allowed to work on its own, without the state entering into a comprehensive bailout operation," Oren says. But Goshen's plan is a mistake, he insists. The bond market is not in need of an injection of cash from the state to supplement funding already provided through the Manof funds. There is a lot of money lying in the hands of institutional investors, he argues. The problem is putting it to work.