Taking Stock / War at the Treasury

Eyal Gabbai is mad.

He wasn't consulted. He was out of the loop. One minute he's the national privatizer starring in the headlines and getting his picture taken with giant checks, and the next it's Accountant-General Yaron Zelekha making the front pages with his plan to give the people stock options in Bank Leumi.

Well, that's how the cookie crumbles. One day you're a star, the next somebody else is basking in the limelight. Not all your suggestions are winners, and friction between ministerial bureaucrats is routine.

But Gabbai, the director of the Government Companies Authority (GCA), decided to go public with his objections to the Bank Leumi stock options plan. In an interview with Haaretz, he warned that the plan would depress the bank's share price, wreak havoc on savings in investment funds, and do nothing whatsoever to cure the ills of the banking system.

"Distributing stock options equitably to all the citizens, as is suggested for Leumi, is regressive," Gabbai weighed in: The poverty-stricken denizens of Ofakim would get the same shares as the millionaires.

He wrapped up with a death-blow, claiming the options plan would deter foreign investors and ultimately scupper the government's privatization plans. "I received responses from multinationals and investors interested in the Israeli economy, who asked if the State of Israel had lost hope that foreign investors would come, and if there was any point of investing in Israel now." If the treasury pursues its plan, foreign investment would spiral down the drain, he said.

Most of his claims were accurate enough. We have already dwelled in this column on the downside of the stock options plan. Gabbai said openly what several treasury officials had been whispering off the record: The options plan would not promote structural reform; it would do nothing for the capital market; and the superlatives Netanyahu was heaping on it were excessive.

My boss has it wrong

But Gabbai is not a commentator, analyst or publicist. The GCA is part of the limited Finance Ministry administration that is subject to Finance Minister Benjamin Netanyahu.

Gabbai's decision to launch an attack unprecedented in its severity against the options plan bearing the finance minister's imprimatur is apparently the first outward sign of trouble brewing at the treasury among its own officials and between them and the minister.

Gabbai was not consulted on the stock options plan. Apparently neither were the ministry's director-general, Joseph Bachar, the budget director, Uri Yogev, the customs chief, Eitan Rub, or the capital markets commissioner, Eyal Ben Chelouche. The options plan was created by Netanyahu and Zelekha.

Horse going one way, rider another

The real story is that a public attack launched by the manager of a government institution on a plan his own minister had declared a few days earlier is part and parcel of Israel's government culture. It allows, sometimes even encourages, the concept that every last bureaucrat is master of his own castle, with his own opinions and agenda, which he may freely air in public.

Foreign investors visiting Israel and meeting with ministers and other Jerusalem circles are constantly puzzled by their failure to grasp government policy on any given economic issue. Everybody they meet delivers his own personal credo and vision, which is never the same picture they received from the person they met an hour before.

Elsewhere in the world, governments aren't quite that convoluted. Fiery debate may happen, but it ends in a decision, which leads to government policy that everybody accepts and pursues, whether eagerly or glumly. It doesn't always work; sometimes differences of opinion bubble up from below, hindering the program's progress, but everybody knows what the direction is.

Foreigners visiting Israel are constantly amazed how the country gets anywhere given the total absence of an overriding path, as each minister, politician and bureaucrat pulls in another direction.

One of Netanyahu's greatest achievements in his initial year as finance minister is that for the first time, he set a clear direction for economic policy. Much of his wordiness is pure PR, and sometimes his words and deeds differ, but the fact is that everybody, from the treasury to the business sector, understands the general direction, and that is tremendously important.

The privatization of Bank Leumi by selling a controling interest, or through stock options, is of secondary importance, so the damage wreaked by the treasury's internal warfare is immaterial. But separating the provident funds from the banks is a drastic move for which Netanyahu will need unwavering support across the board.

The bankers, their lobbyists and their friends in the Knesset and at the Finance Ministry are feverishly seeking weak points in the cabinet and treasury to torpedo the plan. Before Netanyahu rides out to war, he has to ensure that his top brass is behind him. He has to ensure that once the decisions have been made, they had better be marching in the same direction, and at the same speed.