Taking Stock / How the Press Got It Wrong

TheMarker sets the record straight on Gaydamak, Fannie and Freddie, and Olmert.

"Gaydamak wiping out his Israeli assets," the headlines stated last week.

We have to correct that: It was the Israeli assets that wiped out Gaydamak.

The Russian-Israeli businessman could fool the public, politicians and press for two years, as long as nobody actually knew how he'd made his fortune in Angola and Russia. Though in the spotlight, he lavished money on philanthropic causes, he remained a "mystery" man.

But from the moment Gaydamak decided to get into business in Israel, and started to buy up publicly traded companies which are obliged to operate transparently, and whose share prices are set day to day by the market, he wasn't an enigma any more.

Gaydamak bought completely unrelated companies for puffed-up prices, showed that he understands nothing about what they do, failed to recruit and keep quality management, stumbled into legal battles over each step he took and worst of all, he failed to finance his businesses properly. His mark as a businessman in Israel is maybe 3 or 4.

It is of course possible that in a place like Angola or Russia he'd get 9 or 10 out of 10 as a businessman. Note that he made huge fortunes there, enabling his local extravagance in the last couple of years.

People who think they keep track of Gaydamak's businesses told us last week that his assets abroad are worth more than $2 billion. He can't use the money right now for various reasons, they said, but should be able to soon.

We repeat our prediction from about three weeks ago: Gaydamak is going to become a marginalized element in Israeli economics and politics, too. His transparent Israeli businesses wiped him out.

We claimed in this column about six weeks ago that Fannie Mae and Freddie Mac were finished and that the government would have to guarantee all their liabilities, while pretending it wasn't "nationalization."

A toxic combination of foolish regulation in Washington, the incompetence of the credit rating agencies, the cupidity of millions of Americans who thought that real estate prices could only go up and the good old greed of investment bankers made the twin mammoths too big to be allowed to fail.

Together they control half of America's home-loans market. The amount at stake is more than $5 trillion. It's too much to be allowed to vanish.

The U.S. government had to act to save itself from Fannie and Freddie's possible collapse because if they were to fall, or if the fear of their implosion were to drag on and on, America's financial system would have completely fallen apart.

Theoretically the ones who should lose sleep over Fannie and Freddie's fall are the governments of Japan and China, the rest of Asia, too, who bought hundreds of billions of dollars' worth of the two companies' bonds. But they're fine. They knew Washington would step in. They knew it wouldn't dare hurt the foreign investors financing the American consumer's wild spending.

No: Washington is rescuing itself, using the money of the people who'd been throwing it around like water - the American taxpayer.

A day after the police announced that it recommends charging Prime Minister Ehud Olmert on counts of fraud, money-laundering, tax dodging and more, the No. 1 paper in Israel by circulation ran four headlines on its front page: "Covering their asses", "The mistake", "The police's recommendation: Graft", and "But source at prosecution estimates: No evidence."

No evidence of what exactly?

b "No evidence that our prime minister doesn't like first class and 10-star hotels, and strove for decades to find original ways to roll over the costs of his hobbies onto the public."

b "No evidence that our prime minister eschews making decisions and imposing pressure on budgetary issues that touch him or his associates personally."

b "No evidence that Israel's leading correspondents kept the distance that all good reporters should from the subject they cover - Ehud Olmert."

b "No evidence that really explains how the prime minister accrued his great wealth. There is still no evidence explaining why the American billionaire Daniel Abraham, of all the people in the world, decided to buy Olmert's home for $2.7 million."

b "There isn't enough evidence in the Cremieux case. There isn't enough evidence in the Abraham case. There isn't enough evidence in the Investments Center affair. There is no evidence in the Small Businesses case. There is no evidence in the Bank Leumi case, "Olmert tours" case or the Shula Zaken affair and there's no evidence in the Morris Talansky case.

"There is no evidence that the public in Israel is sick and tired of having its taxes pay for the lavish lifestyle of a man like Olmert, about which evidence exists for nothing except that at the end of the day, there's no evidence."