Taking Stock / Hirchson I and II
Jerusalem District Court Judge Moshe Ravid rejected Knesset Finance Committee chairman Avraham Hirchson's petition to delay publication of an article about him in this month's edition of TheMarker Magazine.
The article discusses Hirchson's connection with the chairman of the Leumi health fund, Mickey Zoller, who has recently become a prominent capital market figure. It also addresses the heavy losses incurred by Hirchson's son, Ofer, who is negotiating with the banks to reschedule more than NIS 100 million in debt.
Among other things, Ravid ruled that, in his declaration Hirchson ignored the answers he had given to the reporter who interviewed him. His behavior was "astonishing," the judge wrote.
Hirchson's behavior wouldn't have surprised anyone who's been keeping track of the so-called Brodet panel, which he set up with the Israel Democracy Institute to consolidate recommendations about reforming Israel's capital market and banks.
His official justification for the Brodet panel was to give tools to the Knesset Finance Committee members as they considered a better structure for the capital market and banking system, ahead of debate on sweeping reform.
But the banks' intense involvement in the committee's establishment and composition beg concern that the committee's real purpose is to slip the bankers' views, in the guise of an objective public committee's views, into the Finance Committee debate.
Embarrassed by association
During the Brodet committee's debates, some of its members noticed the ruse and took action. Dr. Yoram Turbowicz, who also works for Bank Hapoalim, resigned from the Brodet committee and his name will not appear on its conclusions. Yitzhak Tal, a former supervisor of banks, who joined the investment committee at Bank Tefahot while the committee was meeting, stepped down two weeks before its work was done, and Prof. Marshall Sarnat said he understood immediately which way the wind was blowing, and declared he'd submit his conclusions separately.
Some of the members who did remain evidently felt uncomfortable, which would explain why at the end of the process the committee published two contradictory sets of recommendations. One is highly considerate of the banks' interests and one is less so.
It has become clear that if somebody thought to use the Brodet panel to soften up the Finance Committee, that somebody shot himself in the foot. The Finance Committee can hardly take its recommendations seriously.
Fly in the ointment
The problem that remains right out there is Hirchson, the Finance Committee chairman. Unless the Finance Committee stands strong, Finance Minister Benjamin Netanyahu will have grave difficulty pushing through his reform of the banking establishment.
Last Thursday Hirchson gave an interview to financial daily Globes. Among other things, he said that not only did he diligently keep his distance from the Brodet panel, and purposely took no part in its deliberations (though he received reports on them from his aide, who observed the first round of discussions), he had not even been party to its composition.
A nice crystal-clear statement, but a little weird, too. It was exactly two months ago, when the Brodet panel was at the height of its discussions, when Hirchson published an article in which he said, among other things: "The think tank is in the middle of consolidating conclusions and its recommendations will be delivered within months, yet two conclusions are already clear... The conundrum regarding the structure of the financial markets has no solution from the textbook... Any solution proffered with the goal of substantially improving the structure of the financial markets will require gradual, long-term implementation. A fast, immediate solution might reduce (the banks') domination (of the capital markets) and prevent some of the conflicts of interest, but it would shock the Israeli economy and significantly hurt it in the long run."
Now, which Hirchson are we supposed to believe? The Hirchson who clearly stated two months ago that it's clear to him what the panel's recommendations should be, and that quickie solutions will be no good? Or the one who stated this week that he is completely detached from the panel's discussions?
We shouldn't believe either one. We should ask why the Finance Committee members allow him to remain the leader when coming to discuss a historic reform of the banking establishment.