Steinitz: State shouldn't ride to tycoons' rescue
Yuval Steinitz doesn't think the state should ride to the rescue of Israel's tycoons, and he may shortly be in a position to ensure that his ideas have influence. Benjamin Netanyahu held meetings this week with business leaders, with Steinitz at his side, and the prime minister-designate tapped his fellow Likud party member to sit on his first-100-days team.
Knesset sources say Netanyahu will be naming Steinitz, a close ally over the years, as junior minister at the Finance Ministry, while the prime minister-designate takes the senior seat himself. What's sure is that Netanyahu and Steinitz hold similar views on the economy; one is where government ends and the free market begins.
"The government should engage in regulation, leaving the private market and business sector to work," Steinitz told TheMarker this week.
What about steps the government could or should take to alleviate the distress felt by corporate Israel? "The government shouldn't be directly helping the tycoons," Steinitz said. Its job is to help create a "more comfortable" economic environment and reduce the uncertainty level, which is currently extreme everywhere in the world.
What the state mustn't do is shove its hand into people's pockets, Steinitz said. It can provide state guarantees, some form of insurance for companies that issue bonds to the general public. It can also give guarantees to banks that lend money to small and mid-sized businesses, he suggested.
It can't help itself to people's money to bail out the tycoons.
Steinitz opposes the suggestion raised by some bankers and business leaders that the government enact a sweeping law to give companies more time to repay their bonds. He also opposes the suggestion that the state guarantee a minimum value for bonds.
He does like the idea of the state helping to underwrite corporate debt by guaranteeing 75% to 80% of new bond offerings. That would cap a company's possible loss, which would mean that companies buying corporate bonds couldn't lose more than 20% to 25% of their money if the issuer goes bankrupt.
Apropos of which, if Israeli companies can't meet debt repayments, Steinitz thinks they should hand over chunks of equity in their companies to bondholders and other creditors.
Steinitz also insists that any assistance from the state be conditional on the company operating mainly in Israel. A company whose business is based on buying properties around the world shouldn't be eligible, in his view. And a company on its last legs shouldn't nurture false hopes. "Assistance would be confined to healthy companies that can survive, but which are operating [amid] uncertainty because of the times," he said. Hopeless cases shouldn't expect life support.