Taking Stock / The Case of the Missing Men

Yitzhak Tal left the job of Supervisor of Banks a year and two months ago. He had been a tough, mulish regulator, but was terrible at politics and public relations. It was therefore no surprise that, unlike most former central bank supervisors who jump straight from the public service into plush, well-paid seats at some bank or other, Tal received no plummy job offers when his cooling-off period ended.

Half a year ago, Tal accepted the suggestion of Eli Yones, and joined a committee established by the chairman of the Knesset Finance Committee, Avraham Hirchson, to discuss reform of the capital market and banks. Yones became involved in the panel after leaving Bank Hapoalim and before taking the helm at United Mizrahi Bank.

This Hirchson committee was a joint effort with The Israel Democracy Institute, or IDI. Its members included Yitzhak Tal, First International Bank of Israel CEO David Granot, Meir Shavit (a former capital market commissioner), former treasury director-general David Brodet, Hedva Beck of the Bank of Israel, Prof. Amir Barnea, Arie Ovadia, Yoram Turbowicz, and Prof. Marshall Sarnat. In short, the panel consisted of the best experts available on the capital markets and business world.

Yet many asked themselves what the panel's purpose was. Hirchson presented it as a professional team that would advise the Knesset Finance Committee and would not be a rubber stamp.

Of belittled faith

Suspicious minds might think the team is supposed to counter a rival team headed by treasury director-general Yossi Bachar which is - wait for it - discussing reform of the capital markets and banks. Such mistrustful types would have noticed that the Hirchson team consists of people who worked for or owned banks and that two weeks ago Tal was hired as a director of the investment committee of the Bank Tefahot provident funds. Tefahot is a subsidiary of United Mizrahi Bank, which Eli Yones now runs.

And Tuesday morning, the first details about the recommendations of this committee began to leak. It transpires the Hirchson committee, also called the Brodet committee, has two alternatives for the key issue of whether and how to sever the banks from their provident and mutual funds. Either separate just the management, leaving the banks owning the funds; or limit the banks' holdings in these funds to 25 percent, the panel suggests.

The gentle compromise this panel suggests is no surprise either. The more surprising aspect is that Tal and Sarnat are sitting on this panel. These are two men who had held strong opinions against the banks and who had supported complete and uncompromising separation between them and the funds. A couple of quick phone calls to the gentlemen cleared up the mystery.

"Shalom, Mr. Tal. We learned this morning that the Brodet committee in which you sit is about to suggest a compromise on the provident funds and mutuals."

Tal: "I don't grant interviews. The composition of the committee changed and I decided to leave it."

"The last interim report from the committee bears your name as a member."

"I don't grant interviews."

"Was your decision to leave the committee linked with your appointment two weeks ago as a director on the investment committee of Bank Tefahot, which belongs to Bank Mizrahi?"

"That is a marginal issue."

"Hello Professor Sarnat. We learned this morning that the Brodet committee in which you sit is about to suggest a compromise."

"I don't grant interviews. I am not on the committee."

"You aren't a member of the panel? You appear in all its documents as a member."

"I am a passive member of the committee. I did not attend the meetings. I understood which way the wind was blowing. My opinion has been known for 20 years, since the Bejsky committee. The banks must be completely separated from the provident funds and mutuals. I am going to be submitting a minority opinion."

Conflicts of opinion

Nor was that the end of the story. More calls to other panel members led to the conclusion that there are differences of opinion between the people closer to and further from the business sector. The result is an intriguing one. Two reports are going to be filed, one suggesting a greater compromise, one a lesser one.

Who will be signing the reports? That is just as interesting. They will be signed by all the committee members (the ones who stay to the bitter end, at least) so one cannot know who adopted what approach. Or: who is for the banks, and who is against them.

Naturally, we are not trying to cast aspersions on the professionalism and integrity of the members of that excellent committee. They are all top-class professionals. The question is whether the ones working for the banks or who own banks should sit on such a committee that is supposed to represent the public.

But it isn't only the committee members who are of interest. So is the person who convened the whole thing. If you read the business pages, you probably know that Avraham Hirchson's son, Ofer, is a player, selling and buying companies for tens of millions of shekels a pop.

But while young Hirchson was a star buyer, he didn't do so well when it came to selling. The result was that he incurred enormous losses and owes a ton of money to Bank Hapoalim. The bank gave him a break, and two months ago rescheduled NIS 115 million worth of debt for repayment in six to eight years.

A lot of people mired in debt would love an arrangement like that. Often enough at a stage like that, the banks would start laying hands on personal assets. Yet in the case of Hirchson junior, the bank was lenient and rescheduled the problem for a long, comfortable period.

Hirchson senior doesn't feel his son's imbroglio should cause him to recuse himself from handling the reform of the banks. On the contrary, he's become extremely active in the cause. Witness how he established this committee, which is tailored to help him take on the treasury's parallel committee.

It makes sense? It doesn't? It's a conflict of interest? Who knows. Maybe like the banks, Hirchson has Chinese walls in his family.