The Bottom Line / Under attack
The banks are currently under general attack. The Knesset Economic Committee wants them to provide a basket of services for a cheaper flat fee and the Bachar committee wants to see them sell off their provident and mutual funds.
Attack A. The banks are currently under general attack. The Knesset Economic Committee wants them to provide a basket of services for a cheaper flat fee, the Bachar committee wants to see them sell off their provident and mutual funds, and yesterday the supervisor of banks issued fresh instructions to cancel excess lending beyond the overdraft limit.
The excess credit is a peculiarly Israeli - and negative - concept. It is quite bizarre because it is referred to as "credit beyond the approved overdraft limit" and yet the excess is also approved. And we're not talking peanuts here. The public's total overdraft stands at around NIS 42 billion, of which 40 percent - NIS 16.8 billion - exceeded the limit.
The banks set very low overdraft limits for small businesses and households, at interest rates of 8-9 percent per annum, but that's nothing compared to the "excess credit above the overdraft limit" on which they charge 13-15 percent - and there's the motive.
When a customer asks to have a larger overdraft allowance, his branch says no, explaining that he has too little security. But, at the same time, they honor his checks - which exceed his overdraft limit - and make even more profits. Another problem is that the customer cannot know in advance if his check will be honored or not. So, therefore, banking supervisor Yoav Lehman has done a grand job, bringing order to a messy business, canceling the "excess credit." While interest rates on overdraft may be expected to rise, at the end of the day we will pay less.
Attack B. Last night, a socioeconomic policy conference was held at the president's house, with the participants competing over who can attack Benjamin Netanyahu's policies more. The director of the Taub Center, Professor Yaakov Kop, argued that the public sector should not be cut - as the evil Netanyahu wants - but rather efforts should be made to encourage growth, and that consequently the size of the public sector as a percentage of GDP will fall. His stand was taken further by Arnon Gafni and Professor Zvi Zussman, who said that shrinking the public sector "went against the values of Jewish tradition."
They completely forgot that, measured in any scale, the Israeli public sector is too large and overweight. It takes up 53 percent of GDP, compared to 42 percent in the developed Western world. Its inefficiencies are blatant, and it is hard to understand why the private sector should make cutbacks, and does so, while in the public sector it is forbidden.
Let's take the Education Ministry as an example. A sizable chunk of its budget is wasted on superfluous bureaucracy and job duplication. There is a ministry management, there are regional headquarters, there are local authority managements and there are also school managements. The ministry also has seven unnecessary regions spread around the country, and 650 supervisors - most of them not needed. So why is it so heinous to slim down the Education Ministry?
Kop, Gafni and Zussman mistake cause for effect. When the public sector is reduced, there will be more resources for the private sector, taxes will fall, the economy will grow and unemployment will drop. "Jewish tradition," which sees labor as a central value, will also flourish in the process.