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Cabinet Votes to Authorize Setting Up Inquiry Panel on Bank Scandal

The Cabinet decided by a 17-4 vote yesterday to authorize the establishment of a commission of inquiry into the alleged misconduct of the country’s largest banks which resulted in the collapse of bank shares in October, 1983.

The Cabinet’s decision was in line with the recommendations of State Comptroller Yitzhak Tunik whose report, released December 31, accused the banks of “reprehensible manipulation” to inflate the price of their shares which made a crash inevitable.

Tunik, backed by Attorney General Yitzhak Zamir, urged a full-dress judicial investigation of the banks because as private institutions they are outside the purview of the Comptroller’s office.

The minority voting against an inquiry consisted of Defense Minister Yitzhak Rabin (Labor), Minister-Without-Portfolio Moshe Arens (Likud-Herut), and two Likud-Liberal ministers. They argued that the Comptroller’s report was so exhaustive that reforms rather than further investigation, were required.

Thousands of investors sustained severe losses when the price of bank shares plummeted on October 6, 1983. The government intervened at the time to guarantee the prices in order to stem the sell-offs–an action that will cost taxpayers an estimated $2.6 billion when the shares mature in five years.

Premier Shimon Peres, who favored an inquiry, has assigned a committee of ministers to discuss its terms of reference with MK David Libai, chairman of the Knesset’s State Control Committee.

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