Ra'anan Cohen had a brilliant idea.

Three months ago Cohen, who had ridden his political horse to death, got a dream job from his buddies in power: to chair the Industrial Development Bank(TASE: INDD.G ) . A salary of NIS 60,000 a month, a plush office, expenses, aides, friends, spokespeople and, mainly, power control over an NIS 13.8 billion balance sheet. What else could a retired politician ask for?

When eyebrows shot sky-high throughout the business sector, which was shocked that a person utterly without banking experience could be appointed to chair an already-shaky bank, Cohen explained that he is an expert on rehabilitating companies, as attested by his rehabilitation of the Labor Party.

Upon publication of the Industrial Development Bank's financial statement, which revealed humongous losses for the second quarter, Cohen unveiled his secret plan to "rehabilitate" the hapless bank. Namely, that the state read, the taxpayers would infuse it with another NIS 250 million to improve its capital structure.

Brilliant. Only a serial healer of institutions could have come up with that one.

To understand how Industrial Development Bank could have lost 10% of its equity within three months, you don't have to delve into its credit portfolio, where you'd find the Peled-Givony group, Gill-Eldar, Gad Zeevi and the rest of Israel's shooting business stars. Nor do you need a full list of the friends, cronies, directors, consultants, accountants and ex-civil service clerks who waxed fat off the bank for years.

All you need to do is crack open the State Comptroller's report, leaf to the bulky chapter on doings at Industrial Development Bank over the last decade, and read, to understand how the state made itself a bed that had to collapse at some stage.

The comptroller's report lists flaws in the bank's management and in attempts to privatize it, but the really attention-grabber is his discussion of its capital and control structure.

Thus writes the comptroller: "The data on the breakdown of control rights and rights to residual profits, or rights upon the distribution of surpluses upon liquidation, shows an irregularity. Holders of ordinary Aleph shares have 94% of the voting rights and the rights to appoint directors. But these shares grant entitlement to only 14% of the residual profit after payment of dividends due to holders of preferential shares. Holders of preferential type Gimel shares, who have no influence over the bank's management, have the right to 76% of the bank's residual profit."

In English: The people who control and run the bank, who affect its financial results over time, receive only a fraction of its gain and feel only a bit of its pain. Profits, and risks, fall on shareholders who are uninvolved in its management.

Unsurprisingly, the ones controlling Industrial Development Bank are the three biggest banks in Israel Bank Hapoalim (TASE: POLI) , Bank Leumi Le-Israel (TASE: LUMI) and Israel Discount Bank (TASE: DSCT) , together with the State of Israel. The profits or losses go to the public, hence when the bank gets into trouble its burdens are devolved onto the shoulders of the taxpayer.

Although Industrial Development Bank is relatively small, its troubles can't be shrugged off. Over the years the state has sunk over a billion shekel into it.

Of course, all the state comptroller's report accomplished was to collect dust on some shelf somewhere. But now that the bank is in serious trouble, having fallen far below its required capital adequacy ratio after its massive NIS 150 million loss in the first half of 2002, the state has to make some nippy decisions.

Which makes this the time to say it: Stop. Enough. Don't leave Industrial Development Bank in the hands of the same institutions that led it to the void. Take it away from its board of free-loading managers, take it away from the treasury's director-generals who have neglected it totally over the years, throw out all those cronies and friends of the government who fed off it for so long.

Watch out for that ostensibly sensible proposal to privatize the thing. Remember, the state has tried to sell it before, but its warped equity structure, comprising 9 kinds of shares, has proved an insurmountable obstacle.

It can't be privatized, and it can't be sustained with its incumbent control and equity structure, which promise that its troubles will persist and that more public money will spiral down the drain.

Therefore, all that remains is to appoint an administrator who will put the bank out of its misery. Who will fire most of its managers, who will gradually shed its credit portfolio, who will wind up the whole sorry affair. That is what the people involved would do if the losses were theirs personally, not that of other people's money.

The only one who would suffer if Industrial Development Bank were liquidated is, of course, its chairman, the "healer", Ra'anan Cohen. We therefore propose that he be appointed chairman of the Hapayis national lottery, in the stead of Avraham Katz-Oz.

Just like Industrial Development Ban, Hapayis is a latifunda whence politicians lavish jobs and perks on friends, above whom serve professional and public committees, who legitimize their decisions.

Unlike Industrial Development Bank, the Hapayis lottery is an unusually profitable institution, as the only ones assuming risk are the customers. There, Cohen wouldn't need to lay on hands.

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