All That Glitters / Fischer in the Oligarchs' Den

Fischer has an obligation to prove that Israel's central bank has someone at the helm who cares about depositors and about the effectiveness and fairness of the country's financial system.

Bank of Israel governor Stanley Fischer has seen a thing or two in his life. He's dealt with crises in developing nations. He was a major figure on Wall Street. In Israel he has battled the unions and the Finance Ministry, and has seen finance ministers and governments come and go. But even he was not prepared for what has unfolded since he decided to take on the chairman of Bank Hapoalim, Danny Dankner.

Suddenly, Stanley Fischer began getting calls at his home from influential figures. Look, they said to him, let's try to fix this thing with Dankner, let's try to give him a chance. Suddenly, Stanley Fischer discovered that the heads of the union at Bank Hapoalim plan to charter buses to his office and protest his wish for Dankner to leave.

Suddenly, everything has become personal. Instead of a businesslike discussion of management practices at the largest bank in the country, personal attacks are being made against him and his supervisor of banks. Fischer, according to certain newspapers, "doesn't himself manage the Bank of Israel properly."

A general smear campaign has been launched against banks supervisor Ronny Hizkiyahu: "Hizkiyahu is planning to take control of the bank," "Hizkiyahu wants to nationalize Hapoalim," "Hizkiyahu is motivated by personal considerations, after not being promoted and not receiving money," "Hizkiyahu is acting in contravention of the law."

As someone who didn't just arrive here yesterday, Fischer shouldn't be surprised. When he decided to demand that Dankner be replaced, Fischer entered the lion's den of Israel's oligarchy. He embarked on a struggle against Shari Arison, the richest woman in the country. He went into battle against the extended Dankner family. He entered the fray against all the advisers and influential figures these families keep on retainer. He crossed swords with all of the businesspeople who are treated with warmth and affection by the credit committees of Bank Hapoalim.

There are very few entities in Israel that do not have a business relationship with Bank Hapoalim, and a significant number of them depend on the bank for their existence. They all have a very clear economic interest in keeping Danny Dankner on as bank chairman. Many stand to lose if Dankner and the man tapped as Hapoalim's next CEO, Zion Keinan, are replaced by individuals who might not be close to them.

Suddenly, Fischer is finding out the hard way how the oligarchy of wealth and political power operates in Israel, and in some cases also about their influence over the media. Suddenly, Fischer sees for himself how managers, board members and well-known attorneys forget the rules of caution and conservatism, ignore the spirit of the law, forget their obligation to the public and to the shareholders and line up behind the controlling shareholders who pay their wages. Along the way, serious damage is done to the standing and legitimacy of the governor of the Bank of Israel as well as the state regulatory system - but apparently that's the last thing keeping the oligarchs awake at night.

It is doubtful that an Israeli governor would be able to cope with the pressure being placed on Fischer, Hizkiyahu and the Bank of Israel today. Every Israeli, however independent-thinking, has interests, friends and family that would be threatened the moment he or she tried to attack those with significant power. An Israeli central bank governor would have to think about his career, about what he will do after he leaves the bank, about where his family members will work, and about whether he is ready to deal with numerous personal attacks.

This is where Fischer's greatness comes into play, and it is perhaps the greatest dividend accruing from the decision to appoint a foreign national as governor of Israel's central bank. Fischer didn't grow up here and he doesn't derive his power from connections in the local government or business community. Fischer, born in Northern Rhodesia (now Zambia), has an international status that no one in Israel can damage, and he has the strength and the personal gravitas to set out to replace the chairman of a major Israeli bank and succeed.

Fischer, not Ronny Hizkiyahu, is the person who decided to bring about Dankner's replacement after being presented with a string of Dankner's failures as chairman of Bank Hapoalim. The CEO switch was one of them, as the Hizkiyahu report that is to be made public today will show, but it's not the only one. Fischer's decision is based mainly on the fear that the declining fortunes of the influential figures who are close to Dankner, and their need for credit and for cash, could lead to additional decisions that will continue to hurt Hapoalim.

The delicate situation of the financial system in Israel and abroad make unprecedented intervention by central bank's in the management of their country's banking system a necessity.

Fischer has an obligation to send a clear message to the business community and to prove that Israel's central bank has someone at the helm who cares about depositors and about the effectiveness and fairness of the country's financial system.