Behind the lines: Banking on leaks

There are a number of ways to view the Fischer fracas.

Fischer 298.88 (photo credit: Ariel Jerozolimski)
Fischer 298.88
(photo credit: Ariel Jerozolimski)
Stanley Fischer is like a transplanted organ in Israel's body-politic. The appointment of the Citigroup vice chairman (and former World Bank vice president and chief economist) as governor of the Bank of Israel last year was heralded as the equivalent of signing Manchester United striker Wayne Rooney to Beitar Jerusalem. Fischer's willingness to leave the financial empire of Manhattan, to make aliya (just like any other Jew from Brooklyn or Addis Ababa) and his effort to speak only Hebrew in public appearances gave many of us a glimmer of hope that Israel might still be a shining beacon for world Jewry. Fischer's star quality has stuck to him for most of the year-and-a-half he has been on the job. Politicians, captains of industry and members of the business media - as hungry as anyone for a taste of international celebrity - have made the pilgrimage to his office. Every one of his speeches has been eagerly awaited; each grave pronouncement greeted with the awe reserved for an oracle. Though it is true that in recent months, he has been subject to some criticism, it is nothing compared to that which his predecessors endured. This wasn't merely another functionary who clambered his way up the proverbial ladder through backroom deals and political favors. Professor Fischer (yes, he's also a bona fide academic authority - from MIT no less, not from one of our own lowly ivory towers) was finally the real thing. Fifty-three years after Albert Einstein turned down David Ben-Gurion's offer to serve as president, Jewish genius had finally returned home to Zion. Initially, a few skeptical voices were raised over Fischer's arrival - questioning the foreigner's ability to adjust his high standards to the "rough and tumble" of Israeli politics. But they were drowned out by the even louder choir of adoration. This week, however, the extended honeymoon officially ended. Bubbling, behind-the-scenes tension in the upper echelons of the bank boiled over on Monday, when Fischer made a move to suspend Banking Supervisor Yoav Lehman and two of his deputies, following a leak from their department. This sent shockwaves throughout the government, the banking system and the press. The relief among financial reporters has been almost palpable. At last, the exalted governor is now fair game. A SHORT summary for the less-than-assiduous readers of the business pages is in order. For months, Fischer has been looking to replace Lehman, who has been focusing on confroning the banks over inflated administration fees, rather than doing what Fischer wants him to be doing: ensuring the banks' financial stability. Finally, on Sunday, Fischer announced the appointment of a new supervisor. In a departure from practice, instead of promoting an official within the national bank, Fischer chose an outsider - Rony Hizkiyahu, a senior executive at Discount Bank. A few hours later, press items began emerging about the supervisor's department recently having prepared a critical report on Discount's credit department - and its chief credit officer, Hizkiyahu. Fischer considered this to be retribution for his having made the appointment. Right away, he summoned Lehman and the two subordinates who prepared the report, and showed them the door. Though not charged with the leak, they were accused of infringing the bank's strict rules of confidentiality. Whoever actually passed the report on to the press, Fischer blamed its authors for letting it fall into unauthorized hands instead of passing it over to him. This act couldn't camouflage the egg that was suddenly splattered on Fischer's noble face. How - it was now being asked - could he have appointed a banker to such a sensitive position, without first finding out whether his own supervising department had information on him? After absorbing the initial shock, financial columnists had a field-day dishing it out to Fischer. There were a few lone voices - such as that of Mati Golan in Globes - who lauded Fischer as the only senior official in Israel willing to exact a price from subordinates for their wrongdoing. But the general view among the pundits was that Fischer was trying to cover up his own lack of judgment in the appointment process, by placing the blame elsewhere. Instead of plugging the leaks, they said, Fischer should concern himself with putting his own house in order. This would entail putting a stop, once and for all, to the decades' long tradition of outrageously high salaries and pensions enjoyed by the national bank's employees - way beyond the norm in the rest of the public sector. While there is a great deal of merit to this criticism, it is hard to overlook the relish with which it was doled out - like a long-denied delicacy. It is also hard to get over the uncomfortable feeling the attacks on Fischer were also a way for leak-driven journalists to protect their sources - and Lehman is well-known for his cordial relationship with the press. THERE ARE a number of ways to view the Fischer fracas. First, there is the issue of leaks and how they are perceived differently in Israel and the US. A couple of months ago, a spot inspection of phone records - conducted by the IDF Field Security Unit - revealed 460 unauthorized contacts between officers and reporters in a single day. There are no plans to prosecute these officers. Nor are officials in other governmental departments afraid to leak information. Over the last decade, there have been only two high-profile cases of senior officials being forced to resign over leaks. Brigadier-General Shmuel Zakai left the IDF after being suspected of leaks in 2005; and a criminal investigation was launched to determine who - on the eve of the 2003 elections - leaked the investigation into an illegal loan received by prime minister Ariel Sharon. The culprit, attorney Liora Glatt-Berkovich, was quickly flushed out and put on trial. But these were sharp exceptions to the rule. Zakai resigned mainly due to personal animosity between him and his superiors. Glatt-Berkovich was sacrificed because of political vengeance and Attorney-General Elyakim Rubinstein's hurt pride. Meanwhile, leaks continue to go on daily, and are accepted as the lifeblood of the local media. In the US, reporters also use leaks. But there, the sources run a much greater risk. Cases in which officials lose their jobs are much more common in America. For three years, in fact, a federal investigation has been underway to determine the source of leaks to journalists on the identity of a CIA agent - a case over which senior administration officials have been indicted, and a New York Times reporter has gone to prison for refusing to reveal her source. The question of which system is better is debatable. But what is clear is that Fischer is obviously trying to apply American standards to his fiefdom, and it remains to be seen whether this won't backfire. Another broader issue - that of public figures' relations with the media - is also raised. Fischer has been circumspect in his dealings with journalists ever since assuming his post. Interviews and briefings have been infrequent; the governor prefers to conduct his dialogue through public speeches and appearances. At the same time, he has been dissatisfied with the bank's spokeswoman, and has taken the controversial decision to hire a private media consultant on a costly retainer. He is clearly finding it difficult to operate in a leak-prone environment. In a desperate attempt to stamp out the practice, Fischer, it turns out, has been forcing Bank of Israel employees to undergo lie-detector tests. FISCHER MAY be beginning to realize that he can't beat the leakers, so he might as well join them. Over the last few days, rumors have begun to emanate from his inner circle of his intention to resign in disgust. Whether or not there is any truth to these rumors, their intent is clear: If such a prominent economist were to leave Israel angrily, the damage to the country's financial reputation could be immeasurable - not something Prime Minister Ehud Olmert and Finance Minister Avraham Hirchson want even to imagine. Fischer wants their backing in an ongoing conflict with the Treasury over a new pay deal for the bank's employees. The finalization of this deal, he hopes, will enable him to get down to the real work he came here to do - which doesn't include incessant squabbling with the bank's powerful labor unions and the "treasury boys." It appears that it is he who is now using the media to further his own interests. As with any new immigrant, it has taken Fischer time to learn the ways of his new country. He finally seems to be getting the hang of it: If you want to get anything accomplished here, a timely leak to the press usually does the trick. [email protected]