"...perhaps the banks should simply be asked to report an American client`s account to the IRS." The way I read the article, that's exactly what the IRS is doing. And there is no problem unless you try to hide that info from the IRS. And if you do, then the USA can go after your bank for hiding the money. So does your Israeli bank get to see your IRS forms? If not, how will they know what to say to the IRS? If you report it and they don't, they're in trouble. If you don't report it and they do, you're in trouble and they're in trouble. So Israeli banks are working to protect themselves from you until the fix is in. They have the right not to do business with you. No one's civil rights have been violated yet on this issue.
Australian police arrest 5 over shooting 'linked to terrorism' (Reuters)
from the article: Israeli banks urge America clients to close Israeli accounts