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Prime Minister Ariel Sharon is furious over the management of the crisis that has led Industrial Development Bank to its miserable condition, and has demanded that Bank of Israel Governor David Klein submit a detailed report on the chain of events in the affair. Sharon has good reason to be mad, since the management of the crisis that basically led to the bank's collapse is typical of the manner in which the bank has been managed for most of its history: amateurishly and negligently.

Despite the fact that the Finance Ministry and Bank of Israel agreed with the Prime Minister's Office to inject a credit line into the bank to provide for its liquidity needs, the decision has not been implemented due to disputes between the treasury and the central bank. The bank has therefore been forced to overdraw its central bank account, incurring heavy financing expenses that only worsen its situation.

As if that weren't enough, worried clients following the news and discovering that treasury and Bank of Israel decisions are not being executed, withdraw their deposits, worsening the bank's liquidity crunch and further shaking the status of shareholders, who are left with an institution empty of deposits.

The treasury and Bank of Israel have in fact decided to sell the loan and deposit portfolios within four to five months, but at the pace at which deposits are being withdrawn from the bank, nothing will be left of them and the only thing to sell will be the credit portfolio.

From the state's perspective as a shareholder, the unfolding events will certainly hurt the consideration it could have received for the sale. Both because the deposits are being transferred to other banks for free and because, at least at this stage, Industrial Development Bank is being charged 61 percent interest on its central bank overdraft.

It is not clear how much the bank's credit portfolio is worth and what black holes are yet to be discovered in it. It is certainly possible that the huge NIS 134 million provisions in Q2 cleaned up the stable nicely, but its problematic situation could encourage debtors to take advantage of the commotion and evade their obligations. As uncertainty concerning the credit portfolio increases, the consideration the banks will be willing to pay for it decreases and the pressure to receive state guarantees increases.

Bank of Israel and the treasury can reach many conclusions from the affair - in the hopes they will not have to be applied on other banks in the future - even if not all of them are expressed in the report Klein is supposed to prepare. Nonetheless, it cannot be forgotten that the bank was brought here by its previous chair Shlomo Borochov, previous CEO Yehoshua Ichilov, its directors, headed by credit committee chair Richard Armon and ministers Natan Sharansky and Dalia Itzik, who appointed political cronies to head the bank, and of course, the shareholders, the state and the three biggest banks, that neglected the bank for years and treated it like abandoned property.