2nd choice for Bank of Israel chief withdraws, amid unconfirmed complaints

In a new blow for Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid as they tackle Israel’s financial challenges, Bank Hapoalim economist Leo Leiderman, who was named Wednesday as the next Governor of the Bank of Israel, withdrew his candidacy on Friday.

Leiderman was chosen to succeed the well-regarded Stanley Fischer in the post, two days after Jacob Frenkel notified Netanyahu and Lapid Tuesday that he would not be taking over from Fischer as originally intended. Fischer announced in January that he would be leaving and stepped down over a month ago. His acting replacement Karnit Flug announced her resignation on Wednesday when she was passed over for the post.

Leiderman informed Netanyahu and Lapid Friday that he wished to withdraw his candidacy, which was about to be vetted by an appointments panel, having discussed the matter with family members and decided he preferred to continue working in the private sector. He had previously indicated he would take the job.

Netanyahu promptly issued a statement expressing his and Lapid’s “regret” at Leiderman’s decision.

On Wednesday, Netanyahu and Lapid had met with Leiderman, and he assured them he had no “skeletons in his closet” and was pleased to take the job, Channel 2 reported Friday night. The prime minister then despatched an economics adviser to ask questions about him in the local financial community, but heard nothing dramatically damaging, the TV report said.

According to Hebrew media reports, the turnaround was a consequence of anonymous complaints about him made to the office of former Supreme Court justice Jacob Turkel, head of the committee charged with vetting the appointment.

Haaretz claimed Friday that these included complaints related to alleged sexual harassment. Channel 2 said Saturday indicated that such complaints were not taken seriously, but said that these and other complaints, including suspicions relating to personal tax matters, media reports about his use of an astrologer, the appearance of private family footage showing him playing with his grandchild, had combined to prompt Leiderman to withdraw from the post.

One caller reportedly urged the committee to look into Leiderman’s past at Deutsche Bank, from which he resigned abruptly in 2002. But Leiderman had simply wanted to return to Israel, the Channel 2 report said.

On Sunday, Channel 2 quoted Leiderman saying he had never faced complaints about his conduct in any of his jobs, and that Turkel had told him no complaints of alleged sexual misconduct had been raised against him.

Army Radio reported Friday night that legal advisers told Leiderman he would likely be able to pass the vetting panel, but that the process “would not be pleasant.”

Following Leiderman’s withdrawal, opposition chief Shelly Yachimovich urged Netanyahu and Lapid to visit the house of acting replacement Flug, apologize to her, and “implore her to take on the post of Bank of Israel head.”

Earlier reports in Israeli media had indicated Leiderman’s withdrawal from the Bank of Israel nomination was likely at least a partial consequence of media ridicule over his interest in astrology.

Lapid said in a statement Friday evening that some of Israel’s economics professors evidently lead “colorful lives.”

On Thursday, Channel 10 reported that Leiderman had consulted regularly with an astrologer, Amos Aharoni, on various matters — a pursuit that caused much merriment in the media. Friday’s Yedioth Ahronoth carried a mocking headline about Leiderman asking how the economy was doing on planet Neptune.

Leiderman said none of his consultations with Aharoni related to professional or financial issues, and that the sessions were nothing more than a “hobby.”

However, an unnamed source told Channel 10 that Leiderman would contact the astrologer “often, at times very often.” He said Aharoni’s advice to Leiderman was based on information such as the client’s date of birth. The news report said the consultations continued during the years when Leiderman held very senior economic positions, that he sometimes spoke with the astrologer “several times a day,” and even took him with him to various events. The report said economists “raised their eyebrows” at news of the unusual combination of “astrology and numerology.”

Leiderman, a longtime professor at Tel Aviv University, currently serves as the chief economist of Bank Hapoalim, and previously headed the Bank of Israel Research Department. He also served as director and head of the emerging markets economic division at Deutsche Bank in New York and London.

“This is a very emotional day,” he said Wednesday night to reporters at his home, hours after he had been named for the job, declining further comment except to say, “We’ll have lots of opportunities to speak in the future.”

Netanyahu and Lapid came to a decision over the appointment following an afternoon of intensive discussions in which they determined that Leiderman would at this point be the most suitable candidate for the prestigious post, the Prime Minister’s Office said. The appointment would still have been subject to approval by the Appointments Advisory Committee headed by Turkel.

“I thank Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid for their trust in me,” Leiderman said following the announcement. “I’m excited to return to the Bank of Israel, and will work to help Israel’s economy overcome the challenges we face.”

Leiderman was born in Argentina and immigrated to Israel at the age of 17. He earned his BA in Economics at the Hebrew University and completed his Masters as well as his PHD at the University of Chicago. His doctoral thesis on macro-economics was written under the guidance of Nobel Laureate Professor Robert Lucas.

Flug, who currently serves as acting governor of the Bank of Israel, had welcomed Leiderman’s appointment and wished him a successful term. However Flug, who also sought the job, also said that after assisting Leiderman’s transition to the Bank of Israel, she plans on leaving the bank after 25 years of employment at the institution. She had reportedly been Fischer’s favored successor.

The Bank of Israel governor’s post is now again vacant as Israel is entering a period of austerity measures meant to slake a deep budget deficit and amid fears that the financial downturn in Europe could also play havoc with Israel’s economy.

Leiderman has spent much of his career researching the impacts of inflation, economic stabilization policy, central bank policy and emerging market economies.

Leiderman’s short-lived appointment was necessitated after Frenkel withdrew his candidacy amid a scandal over alleged attempted shoplifting in a Hong Kong airport duty free store several years ago.

Frenkel said the shoplifting claim arose after a misunderstanding, and bitterly withdrew his candidacy Monday complaining over a media campaign of vilification.

“In an unreasonable and unbearable manner, a person can be put on the spot, just based on assumptions,” Frenkel told Channel 2 after announcing he would be dropping his candidacy.