Taking Stock / Timely bankers' leverage
Bankers have a lot of leverage over Knesset members in general, and over the members of the Knesset Finance Committee in particular.
First of all, the leaders of Bank Hapoalim and Bank Leumi are the lords of Israel's economic manor, and in Israel 2005, money is might.
Secondly, most of the parties owe huge amounts to the banks, and they all need the banks to keep them afloat and operating. The financial pain of the party is much dearer to the Knesset members than the pain of the economy, which is crying out for fundamental bank reform.
But the mightiest lever of them all, one barely mentioned, is the primaries. They're coming like a freight train and the Knesset members urgently need to drum up support among the party centers.
Manna from heaven
Everybody's fixating on the covert meetings between the Knesset members with the bankers and their lobbyists. But the really interesting meetings are between members of the party central committees and the managers and credit officers of the bank branches.
How many of these central committee members need bank credit? For their homes, or their businesses?
Nobody knows, but there's a lot of scurrying under the surface. "The timing of the Bachar Committee was amazing for the Knesset members," one party activist told us last week. Amazing means enormously convenient. How's that? "For some of the Knesset members, the personal contact with the bankers is worth more than gold in these months.
It doesn't matter what happens with the legislation and the vote in the end. Right now access to the bankers is a gift from heaven for the Knesset members," he explained.
This is the background against which the bankers whipped out their last weapon in the war of attrition against the Bachar legislation: their workers.
Union representatives have become as active against the reform as the bank bosses, in lobbying the Knesset Finance Committee.
Many of the labor representatives also belong to party central committees, which gives them special access to the parliamentarians. That may explain why several Knesset members hinted they had reservations about the bank reform because of "harm to the workers."
That's a smoke screen. First of all, why do the MKs think they have to protect the livelihood of bank workers, who are a relatively prosperous minority in society, at the expense of the livelihood of millions of bank customers and the greater good of the economy?
Odd, that. Just two years ago the Knesset Finance Committee approved the pension reform, which slashed pensions paid to hundreds of thousands of the elderly. Why didn't the Knesset members leap up in their defense? Do they care only about workers with powerful organizations heavily represented in party central committees?
Second of all and more importantly, the claim that the reform will trigger mass dismissals at the banks is nonsense. Nobody suggests closing down the provident and mutual funds, merely that they be sold. The buyers will need people to run the funds, possibly even more workers than the funds have now. The buyers will have to invest a lot of money in equity research, analysis and service, which the banks don't always rush to do.
Even if some of the bank workers are dismissed for incompatibility, the amount will be marginal.
The furor about the bank workers is a smoke screen. The labor representatives are working hand in hand with the banks' management to preserve the banks' status and clout in the capital market. It is not a battle over jobs or even over profits: There are plenty of analysts who do not believe the reform will impact the banks' profits at all. That opinion is reflected in the strength of the banks' stocks on the stock market.
Meitav manager Zvi Stepak, who knows the banking establishment and capital market inside out, put it well last week. "The banks are trying to scare the public, saying the financial system will be hurt if the recommendations are executed as is," he said. "First of all, it is not the financial system but the banking system.
"Second of all, the difficulties of Continental Bank and the collapse of Trade Bank and Industrial Development Bank have nothing to do with the Bachar report, nor the credit crisis at the banks in 2002.
"Nobody's talking about firing thousands of people from the provident and mutual funds that get sold. That's nonsense. Whoever buys these companies will need workers, so why fire them? The banks' only fear is loss of power, because their revenues won't be dropping, either. Look, since the Bachar recommendations were published, the banks' share prices have outperformed the stock market."
The Knesset members would do well to disperse that smoke screen and end the ruckus by promising generous compensation for the few hundred fund workers who find themselves on the sidewalk. When that is done, it will become patently clear what the battle is really about: concern for workers, or power, prestige and ego of a bunch of monopolists feeding off the lifeblood of the Israeli economy.