Leo Leiderman Tapped as Next Bank of Israel Governor

Netanyahu, Lapid decide to name former Bank Hapoalim adviser after Prof. Jacob Frenkel withdrew his candidacy over an alleged shoplifting affair.

Moti Bassok
Moti Bassok
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Moti Bassok
Moti Bassok

Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid decided yesterday to appoint Tel Aviv University Prof. Leo Leiderman as the next Bank of Israel governor.

Earlier this week, Netanyahu’s choice for the next Bank of Israel governor, Prof. Jacob Frenkel, withdrew his candidacy for the post, after an investigation was opened into an alleged 2006 shoplifting affair at the Hong Kong airport.

The probe began after it came to light that when submitting his bid, Frenkel had omitted mention of his detention in Hong Kong.

The main issues Leiderman will have to address in the coming months are the interest rate, the strengthening dollar and the real estate bubble. He will probably want to strengthen the bank’s management by bringing in prominent academic figures to key positions in the bank.

Leiderman, regarded as mainstream in his economic approach, is not expected to continue in outgoing governor Stanley Fischer’s footsteps as far as the real estate bubble or the bank’s involvement in foreign currency issues are concerned. He is expected to enter the post gradually and make changes one step at a time. As one who has lived most of his life in Israel, he is expected to be more sensitive to social causes such as social gaps, poverty and education.

Leiderman wasn’t the prime minister and finance minister’s first choice for governor. In fact, he was almost their default choice after the Frenkel fiasco. For this reason Leiderman is expected to conduct himself independently and not cave in to political pressures from the prime minister’s aides or from various ministers.

Leiderman’s appointment is subject to the approval of the Turkel Committee, the advisory committee on senior appointments, headed by retired Supreme Court Justice Jacob Turkel. However, unlike Frenkel’s appointment, which had put the committee in an embarrassing situation, Leiderman’s appointment is expected to pass smoothly and without delays.

Leiderman thanked the prime minister and finance minister for their confidence in him, saying "I'm excited to return to the Bank of Israel and will do what I can to help Israel's economy deal with the challenges facing us."

Dr. Karnit Flug, who has been deputy governor of the Bank of Israel for the past three and a quarter years and is now serving as interim governor, congratulated Leiderman on his appointment and wished him much success.

Flug, who was Fischer’s choice for successor, said she intended to end her 25-year employment with the Bank of Israel, after assisting the new governor with the transition.

Leiderman had been nominated for the post of governor twice before. In 2000, when he was head of the Bank of Israel's research division, outgoing governor Prof. Jacob Frenkel recommended his second in command, Dr. David Klein, as his successor. In 2005 then-Prime Minister Ariel Sharon and Finance Minister Netanyahu preferred to "import" a governor from abroad and appointed Professor Stanley Fischer for the post.

To avoid any possibility of hitches in Leiderman's appointment, Netanyahu asked Prof. Eugene Kandel, head of the Economics Department of Hebrew University and Netanyahu's economic adviser, to examine Leiderman's past. When Kandel found no skeletons in Leiderman's closet, the appointment was approved.

Leiderman, 61, was born in Argentina and made aliyah at the age of 17. He graduated with a bachelor’s degree from Hebrew University and a second degree and doctorate from the University of Chicago. He wrote his Ph.D thesis under the guidance of Nobel Prize laureate Prof. Robert Lucas.

In the last 10 years Leiderman has been Bank Hapoalim's main macro-economic adviser, dealing mainly with Israeli and global macroeconomic evaluations and forecasts.

Leo Leiderman: Room for BoI intervention.Credit: Ofer Vaknin

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