Kudos on the Courage, Bank Leumi. Now Take the Money and Run

A glowing report on Bank Leumi CEO Rakefet Russak-Aminoach was posted last Wednesday on the Mako website.

The report by Ayelet Rosen on Mako (which isn't a shark but the news and entertainment portal of Israel Channel 2 franchisee Keshet) included the following flattering quote from an unnamed confidant:

"There was no tension and she demonstrated no panic. It was important to her that everyone understand why the decision on the debt arrangement proposal with [Nochi] Dankner was the most ethical decision Bank Leumi could take. At some stage she came to her staff and asked them to attack her with questions. She wanted to confirm that everyone understood why reaching an arrangement was the right thing to do."

The story went on to heap praise on Russak-Aminoach's conduct during the crisis over the deal (which the bank later retracted as the public howled in protest) to write off tens of millions of dollars owed to Leumi by IDB controlling shareholder Nochi Dankner. It depicted a tough bank leader who also listens to her advisors and colleagues.

Rakefet Russak-Aminoach is depicted as a person who despite her senior position and crowded schedule, makes time for her family. She comes off as cool and collected, but also aware of having been caught up in a crisis caused by a mistake that she or someone on her staff made.

And what a crisis it is. It must be managed like a "war," wrote the confidant, with "marathon meetings," updates from media consultants "every quarter-hour" (!) and constant monitoring of media coverage.

Ball is back in Leumi's court

Uh huh. There are however other people, who weren't interviewed for Rosen's Mako item, who have formed a very different impression of the conduct of the CEO of Israel's second-biggest bank in the past two weeks. Let's just say that "There was no tension" would not be their first description of her conduct during the crisis.

Either way, Russak-Aminoach did arrive at a courageous, unprecedented decision. She chose to surrender to public demand – in repudiation of both her own initial stance and that of her board of directors – and to cancel the debt agreement reached with Dankner's private company Ganden Holdings.

Russak-Aminoach realized that analytical explanations of the NIS 100 million in cash that Leumi would receive from Dankner were of no interest to the general public. People were mad as hell that the bank stood to forgive NIS 150 million from the debt of a billionaire businessman.

Now that Dankner has returned from Argentina, from a trip aimed at confirming that white knight Eduardo Elsztain was still going to save him from his massive debts, the ball is back in Russak-Aminoach's court.

Chicken or egg

The news Dankner brought back from Argentina was that Elsztain is prepared to invest NIS 65 million in Ganden and NIS 205 million in IDB Holding Corporation, on condition that both holding companies reach a comprehensive debt agreement with their creditors.

(Such an agreement, it must be said, would not address the newest fly in the ointment - the move by IDB Development Corporation bondholders to kick Dankner out of the driver's seat and take the wheel themselves.)

Russak-Aminoach faces another decision now. As Ganden's main creditor Leumi can only get its hands on NIS 55 million of Elsztain's money. The previous deal, which promised the bank NIS 100 million in cash, was much more attractive.

That proposal had all of Elsztain's contribution going to Ganden first and only afterward, with numerous stipulations, to IDB Holding. Now the story is different altogether.

So what should Russak-Aminoach do? Should she stick with her brave decision to scrap the debt agreement, or try to stitch together a new deal? Well, if she rejected NIS 100 million two weeks ago, she should certainly reject NIS 55 million. Right?

But wait a moment. Perhaps Elsztain, the inscrutable businessman from Buenos Aires, is still willing to inject funds into an insolvent Ganden. Why? No one knows but Elsztain, Dankner and God himself.

But at the end of the day, Bank Leumi isn't a charity for orphans, it's a for-profit institution. If someone gives it money for nothing it must say, "Thank you very much." It should emulate the title of the 1969 Woody Allen movie and take the Elsztain money and run.

But after it takes the money Russak-Aminoach has two critical tasks. First, to make sure the bank does not erase a single penny of the remaining NIS 400 million Ganden will still owe Leumi. And second, to keep on trying to collect the balance from Ganden through all means at the bank's disposal, including taking control of the holding company's assets and removing the failed executives who allowed the IDB group to deteriorate into insolvency.