Viewpoint / Thank God for Cohen
The Industrial Development Bank affair has become truly surreal.
Not a week passes without the bank's gradual slide to oblivion giving birth to another farcical situation, mainly indicative of the nation's weakening managerial and governmental norms.
Earlier this week, the prime minister hosted a discussion about the bank's woes on the occasion of the Bank of Israel's delivery of its report on the affair. The central bank, the Finance Ministry and the prime minister took advantage of the occasion to play tug of war over the interest the Bank of Israel will charge Industrial Development Bank over its lifeline credit. The central bank wanted to charge higher rates, while the treasury favored lower ones.
It sounded like haggling over fish, but who exactly were the buyers and sellers here? Industrial Development Bank is owned by the state, the Bank of Israel is the watchdog that supervises its actions, and the government has already decided to dismantle the bank and sell its credit portfolio. The state has even asked the big banks for offers.
All that remains is to discuss how to best carry out the mission with minimum pain to all.
Business as usual
But the most bizarre thing of all is that at Industrial Development Bank it's business as usual: it continues to supply credit and has even appointed a new deputy CEO. Meanwhile, the treasury wants it to get cheap credit, but the central bank is balking. What's going on? Do they regret the decision to close down the bank? Do they want to continue to support it?
While all that is happening, the hot potato of responsibility is whizzing around like a hockey puck on acid. Everybody is blaming everybody except for themselves. Prime Minister Ariel Sharon lambasted the central bank governor, David Klein, accusing past supervision of being lacking. The Bank of Israel immediately shot back that Sharon and the government knew everything months in advance and did nothing. To prove that claim, the central bank even dug out and leaked a letter that the Supervisor of Banks had sent to the finance minister warning him about the bank's sorry condition.
Yesterday morning, a few more rats deserted the sinking ship. In a letter to the bank's chairman, Ra'anan Cohen, directors Ariella Zochovitzky, Pe'er Nadir and Yehoshua Ne'eman announced their resignation, blaming it on the high interest rates the central bank intends to charge for credit.
"Under these circumstances, we regretfully reached the conclusion that there is no point or utility in our continuing membership on the board of directors, which has lost all its significance", the directors wrote.
The trio also had a clear-cut opinion as to who brought the bank to its knees: "pointless feuds among the various government bodies and failure to reach decisions on time caused heavy damage to the bank," they wrote.
The various attempts to shake off responsibility were to blame for the run on the bank and the liquidity crisis, they added. Whose attempts? Those of the Finance Ministry and Bank of Israel.
If not for Cohen
Their accusations border on chutzpah. The Finance Ministry and Bank of Israel alone were responsible for the bank's condition? Did the directors on its board and in its various committees bear no shred of responsibility? Who approved the generous credit lines to the Peled-Givony group, which subsequently collapsed, leaving the bank a tremendous hole? Who allowed the bank to lavish loans on every Tom, Dick and Yossi who couldn't borrow a sou from anybody else?
We heard no peep of warning from the banks' directors about the bank's situation. Not one. Not one single director voted against the appointment of Cohen as chairman. He may have been a Labor government minister, but he had not a day's experience in banking yet was chosen even though the public clearly objected. Even the Supervisor of Banks hinted, with the delicacy of a sledgehammer, that the appointment was inappropriate.
Yet the letters of the resigning directors contain not a hint of culpability or breast-beating. Their message is that the Bank of Israel is determined to liquidate the bank, so they'd rather quit now than sit back and wait to be fired when the doors are locked. They do claim in their letter that the Bank of Israel has usurped their powers, but the truth is that it's hard to be impressed with what they did with their powers beforehand.
As for Cohen's appointment, they entertain no doubts about that either. "In retrospect," their letter ends, "he turned out to be the right man at the right time for the job."