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Stanley Fischer, the governor of the Bank of Israel, is worried about a real estate bubble in Israel. In an exceptional move, Fischer invited Banks Supervisor David Zaken to the interest rate meeting a month ago. Zaken presented current data on housing prices and mortgages to the central bank's management.

One committee member unambiguously warned that Israel could fall into a real estate crisis like those that hit the U.S. and Britain four years ago. The senior official warned that housing prices could suddenly drop tens of percent.

Fischer has not hidden his worries about a real estate bubble over the past few months. In fact, he has spoken out on the matter at almost every opportunity. The question is what to do about the problem. The limit on variable rate mortgages that Zaken announced yesterday was already in the works a month ago, but it was postponed when Fischer raised April interest rates by 0.5%, to 3%. Fischer had been worried that the public, politicians and the media would have trouble taking both decrees at the same time.

Everyone involved in making housing policy, including Prime Minister Benjamin Netanyahu, Finance Minister Yuval Steinitz, Housing and Construction Minister Ariel Atias and Fischer, knows the only real solution to skyrocketing housing prices is increasing the housing supply. But even though the price increases of the past two years are driving them crazy, they have done almost nothing to increase supply.

Instead of pressuring Netanyahu and Steinitz to increase the housing supply - and then-Housing Minister Ariel Sharon proved in the 1990s that Israel knows how to do this - Fischer has tried three times in the past year to find a seemingly easier solution through limiting mortgage lending. But even Fischer knows such actions will have only a marginal effect.

Stanley Fischer is a devotee of free markets. His believes markets should be allowed to adjust themselves.

But for the past three years he has violated his own basic instincts, intervening in foreign currency markets to weaken the shekel, and in the real estate market to reduce demand.

Yesterday's directive will mostly hurt young couples buying their first homes or middle-class buyers trying to improve their lot. It will not hurt the well-off, who can always find enough credit to buy a second home or a new house.