Taking Stock / The Next Governor

Only two names remain.

The first is the incumbent, Dr. David Klein, who has held leading positions at the Bank of Israel for the last 17 years. The second is Prof. Avi Ben-Bassat, who was a top personality at the central bank until eight years ago. From there, he took the job of treasury director general and in recent years returned to academia.

First of all, it is disappointing that only two contenders remain in a race that started with six or seven.

It is a disgrace that academia and the business sector couldn't produce a longer list of economists worthy of esteem, people with broad understanding of macroeconomics, banking and business, as well as uncompromising integrity - people worthy of becoming the next Bank of Israel governor.

We had hoped to see more exciting candidates, people with more charisma, leadership and talent, people with more potential to reshape Israel's economy and influence the government. Even other potential candidates mentioned, such as Prof. Elhanan Helpman and Haim Ben-Shahar, have been tapped time and again over the last decade and refused the job.

Klein, the better and the worse

The upside of the two candidates, Klein and Ben-Bassat, is that both are thorough professionals and they have integrity, too. At least we know there is one top position in government filled by a person devoted mainly to the public interest, who wouldn't sell us down the river for a bowl of lentils. David Brodet, who seems to be a compromise candidate if the authorities can't agree on either Klein or Ben-Bassat, is also a professional who hasn't yet become the tool of cronies and commercial interests.

Klein let us down several times during his first term. He made a bad mistake with his steep 2 percent interest rate cut in December 2001, which contradicted policy adhered to over years. He failed to respond in time to economic changes and he didn't grasp the true gravity of the crisis Israel entered after the intifada resumed and the Nasdaq crashed. He has done badly at managing the Bank of Israel and proved wanting in his communication with the public and policy-makers.

But part of the disappointment stems from the high expectations created after his success at spearheading capital market reforms in the 1990s. And Klein remains one of the few people in government who has a clear, transparent and advanced theory of economics, to which he adheres with consistence.

His greatest disadvantages are a lack of charisma and leadership and his failure at managing the central bank. His great advantage is that he has already paid the tuition fee. He has accrued vast experience in the Bank of Israel's various functions, and when the moment of truth comes, the markets apparently believe in him and in his economic dogma.

And Ben-Bassat

Ben-Bassat is also an excellent economist and a true civil servant. You don't have to wonder whose interests he's really serving, or which lobbies hide behind his decisions. He thinks at macro levels, he thinks of the greater public good. He isn't busy preparing his next cushy job or doing favors for friends.

His greatest advantages are his deep understanding of Israel's economy and the fire of reform that burns in his eyes. He knows that Israel's economy badly needs several reforms and he isn't afraid to confront the powers that be.

His greatest disadvantage is he, like Klein, is not made of the stuff of leadership. He was a let down as director general of the Finance Ministry, under Avraham Shochat. When Silvan Shalom became finance minister, all Ben-Bassat could do was hand over the keys and quit.

Ben-Bassat has less experience in monetary matters. In the past he held several anachronistic views, such as managing monetary policy by intervening in the forex market.

In an era of zero inflation and dropping interest rates, with the word "depreciation" vanishing from our lexicon, the choice of our next central bank governor may seem unimportant. But make no mistake. The governor will play a crucial role in reforming the banks and the capital market, in regulating the banks and in helping the Finance Ministry push through its structural reforms.

This is the Middle East. This is Israel. Nobody can promise that the era of financial upheaval is over. One day the American loan guarantees will run out. Stock exchanges around the world will crash. Interest rates will soar around the globe. There are a thousand possible scenarios and nobody can say what the future will bring. But when it happens, we all want the person at the helm to have experience and credibility, of the kind that Klein or Ben-Bassat possess in spades.