The Bottom Line / Better late than whenever
In October 1983 bank shares collapsed following illegal manipulation by the banks' managers, which for some reason has been neutrally named the "regulation" scandal.
In October 1983 bank shares collapsed following illegal manipulation by the banks' managers, which for some reason has been neutrally named the "regulation" scandal. If the state had not dug deep into the pockets of the citizens and come up with some $7 billion, the banks would have gone belly-up.
Since then, every government has said it wanted to sell the banks, but this has not been strictly true. The mid-1990s were a ripe time to sell, Israel was enjoying a deluge of foreign investors arriving hot on the heels of the Oslo accords. Indeed, in 1993 Union Bank (Bank Igud) was sold after being split from Leumi, in 1994 Mizrahi was sold off, and in 1997 Hapoalim went too.
But the politicians kept their hands on Leumi and Discount, which was a serious mistake. Drunk on power, they wanted to keep their oars in the capital market and to appoint to the heads of the banks those who could show their gratitude.
There are those that see the faults in the options plan, they fear questionable parties will take over Leumi. But that's a false worry as the supervisor of the banks won't let it happen, and as they know that, and they're not out to make losses, so the same individuals won't head into the adventure. There are others that complain about distributing the options, but that's a false cry too.
The real alternative is the status quo, with no sale, no money and leaving the bank in the hands of its managers, or selling to the general public. Admittedly the options plans leaves the managers in place and in charge, but within a short time somebody will snap up the shares and will take over the bank, as it should be.
And so that everyone will make the most out of the process, the PR campaign should be on full throttle, to explain to the public the value of their options. One proviso: the plan should allow for the immediate trade in the options, which would stop the state from getting back in the game - every investor's nightmare, putting up the money only to see the state get back into control.
The plan's advantage is not in encouraging private consumption or increasing activity in the capital market, but rather the immediate sale of Leumi, with no going back. The government cannot get cold feet in the middle of the game and give in to political presure as it did with Bezeq's privatization.
The economic benefits will emerge when finally there are private owners running Leumi and Discount, which will hone management, make new and far-reaching changes (see Hapoalim and Mizrahi), and contribute to the growth and development of the economy.