For many long years it appeared that the Israeli banks enjoyed an anomalous situation. When the economy was growing and the capital market flourished, the banks benefited from high profits and fat bonuses. But even when the economy fell on hard times, the banks continued to report high profits as if they didn't belong to the Israeli economy at all.
Thus during the years 1987-88, when there was a recession, the banks continued to show profits, even while all around them, factories and businesses were collapsing. In 1989, when the dimensions of the crash of the kibbutzim, the moshavim, the Sneh insurance company, Solel Boneh and Koor became clear, the banks wrote off NIS 10 billion and extended long-term loans of tens of billions of shekels. And despite it all, they continued to show profits.
This anomaly has been explained by the banks' control of the credit and capital markets and the millions of captives whom they hold as customers - we, the households that pay high interest and enormous service charges that offset some of the write-offs.
Now it turns out that even this anomaly has come to an end. This year even the banks are suffering from the recession. Bank Discount, First International (FIBI) and the Union Bank reported considerable losses. The Industrial Development Bank even required government assistance - otherwise it would have gone bankrupt.
What put an end to this anomaly was the recession, which is the longest in the country's history. It began in 1996 in the real estate industry and in 2000 spread to all branches of the economy, from tourism to high-tech. The banks continued to "stretch" 2001 in the hope that the situation would improve, but at the end of the year the crisis peaked, as economic activity dropped, transaction volume at the banks declined and bankruptcies increased. The result was that the banks had to write off loans worth hundreds of millions of shekels, report losses and sadly join the whole Israeli economy, mired in its miserable situation.
This year another belief was shattered. Until now we believed that the banks were unconditionally stable and that our money was perfectly safe. This year that faith was also battered. The first blow stemmed from the Trade Bank scandal. Instead of acting swiftly, appointing an authorized manager for the bank on the same day that Etti Alon told the police of the embezzlement and declaring that guarantees would be provided for the depositors' money, the Bank of Israel and the Finance Ministry tarried, stuttered and uttered superfluities: Bank of Israel Governor David Klein said that the public should carefully consider its deposits in small banks and Finance Minister Silvan Shalom declared that this is the last time the state will provide guarantees for depositors.
This caused the public to lose faith in the system. Klein and Shalom were not working in cooperation with one another, argued over every jot and tittle and only in the end announced that 95 percent of each deposit would be guaranteed, though a large share of the Trade Bank's customers have not yet received their money.
The blow caused by the Industrial Development Bank affair was even worse. The central bank warned the owners (the treasury) of the bank's shaky condition and demanded action "without delay," but the treasurer and senior Finance Ministry officials ignored it. They were devoting most of their time to figuring out how to lay the blame on Supervisor of Banks Yitzhak Tal and Klein himself.
Later, there were leaks to the media regarding the bank's difficult situation and the bank's chairman, Ra'anan Cohen, announced that he needed NIS 200 million extra capital from the treasury - an irresponsible statement.
The result was a rush on the bank and the threat of bankruptcy. At that point it would have been possible to halt the dangerous process via a swift move of cooperation, in other words, turning the treasury's deposits into equity, and the immediate extension of a line of credit by the Bank of Israel. But again the repressed hostility between Shalom and Klein did not allow their work to proceed normally. Each was trying to make the other side appear guilty in the eyes of the public. This is what happened regarding interest rates and the budget deficit and likewise regarding the banks.
It has already been said that because of senseless hatred the Second Temple was destroyed and unconditional love will pave the way to the construction of the Third Temple. Since it is hard to expect "unconditional love" between Shalom and Klein, they should at least stop their senseless hatred.
Want to enjoy 'Zen' reading - with no ads and just the article? Subscribe todaySubscribe now