Prof. Jacob Frenkel was a very good governor for the Bank of Israel, and for Israel as a whole, from 1991 to 2000. He had a successful international career beforehand, and a successful international career afterward. Yes, he had his failures. Anyone standing at the forefront of the global economy for decades will have failures. Nobel prize winner Prof. Joseph Stiglitz regularly criticized outgoing Bank of Israel Governor Stanley Fischer for the advice he gave South Korea and other Asian nations in 1997 and 1998 as deputy chairman of the IMF.
Since Prime Minister Benjamin Netanyahu announced that Frenkel would be the next central bank governor, many have made great efforts to focus on Frenkel’s shortcomings.
In making the decision, Netanyahu knew full well about Frenkel’s weaknesses − not as an economics professor, but as a person. You don’t need to look too far. The 2002 state comptroller’s report detailing the unsanctioned expenses Frenkel took from the central bank − before being made to repay it − is well known to anyone who reads newspapers in this country. Yet, nonetheless, Netanyahu chose Frenkel.
Netanyahu also knew about the Hong Kong affair. After all, it appeared in the Israeli press seven years ago, at the time Frenkel was accused of shoplifting from a duty-free shop at Hong Kong International Airport. It’s not a simple story, and it’s quite an unpleasant one. Frenkel has his version of events, but still, it’s a tough story, particularly taken on top of the 2002 report. None of the other bank candidates faced similar allegations.
Yet Netanyahu chose Frenkel unhesitatingly. Finance Minister Yair Lapid happily signed off. President Shimon Peres was thrilled. Should the appointment be brought before the cabinet for approval, it will undoubtedly be approved without hesitation.
Frenkel’s appointment was received happily by the markets and by most senior economists in Israel. But a cloud has hovered over it. It’s good that Amir Oren brought attention to the Hong Kong story on Haaretz’s website on Friday, and it’s good that it received such wide media coverage afterward. It’s not nice to read that the former and potentially future central bank chairman was entangled in shoplifting allegations. Frenkel’s version will be examined − to the extent that’s possible seven years later. And yet, every man will judge him. Frenkel is no angel.
A few weeks ago, before the Hong Kong story resurfaced and as the last wave of criticism died down, senior government members expressed concern that Frenkel would ask himself “Why do I need this headache?” and rescind his candidacy. Senior economic figures voiced similar concerns. On the other hand, this raises another question: Whether Israel needs a bank governor whose background includes the 2002 report and the Hong Kong allegations, and whether it would be better off with a governor less well-known in the United States, with less experience and a stronger connection to Israel.
The Turkel committee is charged with vetting candidates for senior posts such as the central bank governor. The committee has four members − former High Court Justice Jacob Turkel; former Finance Minister Moshe Nissim; former MK Gila Finkelstein; and Public Service Commissioner Moshe Dayan. That committee read over the 2002 report several times. Three of its members are jurists. Finkelstein was principal at a prestigious high school. The team concluded, apparently unanimously, that Frenkel was an appropriate candidate. But then the Hong Kong affair landed on its desk.
There are various claims as to who brought the affair to the committee’s attention. The goal seemingly was to undermine Frenkel’s candidacy in order to advance someone else’s. While that goal may be unholy, it’s good that the committee will be discussing the Hong Kong story before submitting its final opinion.
Frenkel is scheduled to present his story to the Turkel committee in a week. If it approves him, the decision may be appealed to the High Court of Justice. The cabinet and the president will then have to approve the candidacy, unless Frenkel drops out.
Frankel had anticipated that he would be taking up the post in three months. Now, he has a new consideration regarding whether to take the post − public opinion.
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