Bank of Israel 370.
(photo credit: Wikimedia Commons)
In less than a week, a second candidate to replace Stanley Fischer as governor
of the Bank of Israel has abruptly backed out.
First it was Jacob
Frenkel, chairman of JPMorgan Chase International and an internationally
Frenkel withdrew his candidacy to serve a second
stint as head of the central bank last week amid accusations he had shoplifted.
Though charges had never been brought against him and though the incident took
place in 2006, for the news media, and for the public, it was enough that
suspicions had been raised that Frenkel had walked out of a duty free shop at
Hong Kong’s international airport without paying. The campaign of character
assassination was launched.
Failing to defend himself convincingly in the
media, Frenkel decided to forfeit the dubious honor of serving as governor and
stay put at his lucrative JPMorgan post.
Next came Leo Leiderman, chief
economist as Bank Hapoalim. The circumstances of Leiderman’s decision are less
clear. The office of Prime Minister Binyamin Netanyahu simply announced just 48
hours after his appointment that Leiderman no longer wished to be considered a
candidate for the post.
Leiderman said that after “family consultations”
he decided to give up the opportunity to serve as governor, preferring a more
private life as lecturer at Tel Aviv University and as Bank Hapoalim’s chief
A Channel 10 report claimed that Leiderman frequented an
astrologer. Even if that were true, it would not be grounds to disqualify the
man. Leiderman would, after all, have to justify policy decisions by quoting
from more than just astrological forecasts.
Whatever the reason for
Leiderman’s sudden change of mind, the second failed appointment, which one
senior Bank of Israel official called a “fiasco,” seems to be connected to the
rushed choice made by Netanyahu, which traditionally also receives the okay of
the finance minister.
Though Fischer announced his decision to step down
back in January – providing plenty of time to find a replacement – Netanyahu
either procrastinated or spent a lot of time trying to convince
But after Frenkel’s last-minute pullout, a full month after
Fischer officially stepped down, Netanyahu was forced to scramble for another
candidate. The vetting process was, unfortunately, not thorough enough.
Essentially, the prime minister alone has the power to elect the governor. And
once in office the governor enjoys a tremendous amount of leeway in
An important reform instituted by Fischer during his
stint and included in the Bank of Israel Law dictates that all monetary policy
decisions must be made within the framework of a special monetary
Thanks to Fischer’s reform, gone are the days when the
governor could, theoretically, decide monetary policy
Now some are calling to revamp the appointment process
for the governor of the Bank of Israel as well. Knesset Economics Committee head
Avishay Braverman said he is mulling legislation to that effect.
does seem to be a lacuna. The law should at the very least stipulate that the
appointment process must begin early enough before the outgoing governor is
slated to step down and that a minimum number of prospective nominees be
considered for the position.
We live in an era of increased civic
engagement. Once upon a time the Israeli public was willing to reconcile itself
to a political reality in which it had little, if any, say regarding decisions
or appointments the prime minister and other senior political leaders made
behind closed doors.
The socioeconomic protests of the summer of 2011
were the boldest expression of the sea change that has taken place. Israelis are
no longer willing to show deference to government decisions except, perhaps,
with regard to security-related ones, which, of necessity, are made without
The appointment process for the Bank of Israel’s
governor is just another issue that the public feels it has the right to
influence. Frenkel and Leiderman are, admittedly, casualties of this public
awakening. But perhaps if the appointment process had been conducted more
professionally, and Frenkel and Leiderman had been given the opportunity to
respond to their critics, Netanyahu would not be in the uncomfortable situation
of searching for a third candidate to replace Fischer as governor of the central