Frenkel fights for Bank of Israel governorship

Bank Hapoalim chief economist Leo Leiderman waits in the wings.

Jacob Frenkel is in a dilemma. He reportedly avoided until now a return as governor of the Bank of Israel due to worries that embarrassing incidents during his public service would be revived. Moreover, if a scandal such as the alleged shoplifting affair in Hong Kong seven years ago had occurred two or even five years ago, he would have waived the chance to become governor, citing "personal reasons."

But Frenkel is at the end of his career, and he wants to return to, and stay in, Israel. Rumors claim that the position tailored for him at JPMorgan International, which opens doors to international forums, is almost over and he is looking for a new job with a lot of PR, politics, and international travel, which he loves. It will not be easy for him to find such a job at a high salary, especially when the whole world learns that he was forced to forego governor of the Bank of Israel because of alleged shoplifting. This is liable to deter financial institutions. He will therefore reportedly find it very hard to back down, and he will fight to the end, otherwise, he will end up with nothing.

Two weeks ago, Turkel Committee members told "Globes" that no flaws were found in Frenkel's appointment as governor of the Bank of Israel. Since the committee only examines ethical aspects of a candidate, it seemed that the only obstacle to his appointment was the serious State Comptroller report about the improper use of public money, which caused him to repay NIS 250,000 in illegal payments, and the filing of a complaint with the police that almost led to the opening of a criminal investigation. But the committee members decided that the report was not serious enough to torpedo the appointment.

A few days ago, when "Globes" asked the Turkel Committee members about the delay in writing of the minutes, it was told that the delay was technical. However, it now turns out, following an investigation by Hebrew daily "Haaretz" that the committee members are examining another affair that had been forgotten: the alleged shoplifting of perfume from a duty-free shop in Hong Kong. Frenkel said in response that the incident was an unfortunate misunderstanding, and that Chinese Authorities expressed their apology and their appreciation that he did not sue them for compensation.

It is possible that the Turkel Committee would not disqualify Frenkel over the alleged shoplifting, but the revelation of the incident forces it to examine the matter and why Frenkel did not disclose it, and embarrasses it.

Sources inform ''Globes'' that at least two NGOs The Movement for Quality Government in Israel and The Legal Forum for the Land of Israel intend to petition the High Court of Justice against Frenkel's appointment. At least one petition is likely from ordinary citizens. The petitions are waiting for the Turkel Committee's decision. If the High Court disqualifies Frenkel, after the committee approves him, committee chairman Judge Emeritus Yaakov Turkel and the other committee members will have to pack up and go home.

Dilemmas for Netanyahu and Lapid

Prime Minister Benjamin Netanyahu also faces a dilemma. Let us be clear: if there was another candidate - an international figure, a global star, of the kind that he likes - he would have thrown Frenkel out long ago, and wished him good luck. But Netanyahu has a problem. The international stars are not coming, he has no more rabbits in his hat, and he is running out of time. He erred by waiting until the last minute, and uncertainty over the identity of the next governor is already doing damage.

If Frenkel's appointment is nixed and Netanyahu "compromises" on a local candidate, he will chalk up another embarrassing affair, another failed candidacy, another associate abandoned by the prime minister. And this is happening when his problematic relations with his closest aides is again in the headlines.

The Prime Minister's Office has declined to comment so far.

Minister of Finance Yair Lapid also faces a dilemma. Although he praised Frenkel, calling him a "friend and neighbor", the truth is not flattering. Netanyahu notified him of Frenkel's appointment just two hours before announcing it to the public. However much Lapid tries to conceal hit, Netanyahu did not include him in the decision.

Lapid had two options: launch another war against Netanyahu, or swallow the bitter pill and play the game. Wisely, he chose the second option, but in his political inexperience, he showed too much enthusiasm and hugged and flattered Frenkel in front of every possible camera. Had Lapid played the game more cautiously, he'd have more maneuvering room. He didn’t and now he hasn’t.

The statement from Lapid's office says it all, "Obviously the minister of finance was unaware of the incident. The matter is being examined by the Turkel Committee."

If Frenkel falls

If Frenkel is not appointed governor, which as of Friday, seems increasingly likely, Netanyahu really, really, does not want Deputy Governor of the Bank of Israel Karnit Flug to get the top job. He believes that she is not right for it. His aides say that the only reason he has not said so is that it was convenient for him, so long as Stanley Fisher was still in the country, for her to be the leading candidate. The other problem with Flug is that Lapid really wants her for the job, and has said so publically, further hindering her.

The most prominent candidate is Bank Hapoalim chief economist Prof. Leo Leiderman. He is the only candidate who reached the finishing line, the only one who met Netanyahu, and the only one who Netanyahu potentially wants as governor of the Bank of Israel. Until June 24, it was either him or Frenkel.

Leiderman has all the qualities: an outstanding academic; a supreme financier; experienced executive; familiar with both international markets and Israel's banking and financial system; and knows the Israeli economy, economic institutions, and politics.

If Frenkel's appointment is taken off the table for any reason, Leiderman will be the next governor of the Bank of Israel.

Published by Globes [online], Israel business news - www.globes-online.com - on July 14, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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