Children of a lesser overdraft
The chairwoman of the Knesset House Committee, Kadima MK Ruhama Avraham, knows what really matters for an MK: publicity. When she was named deputy interior minister on the eve of the elections, she swamped the media with so many press releases that newspaper offices considered buying a separate fax machine just for her faxes.
When the assistant to Kadima MK Sofa Landver took a plant out of Avraham's office, Avraham didn't think twice before announcing with trembling voice that maybe "documents" were taken, and that she felt "raped," no less. She won another impressive round of press coverage.
Now, she's jumped on a new bandwagon, announcing on Monday morning that she reached an agreement with the finance minister on a three-month postponement of the regulation prohibiting deviation from the banks' approved overdraft levels. The only problem is that there was no agreement.
Avraham may have spoken with with Avraham Hirchson but he didn't agree to a thing. But what do the details matter? Avraham won headlines again, and apparently, as far as she is concerned, it doesn't matter if publicity is negative or positive.
The great populist show over the credit framework was started by Likud MK Moshe Kahlon, chairman of the Economics Committee, who proposed a bill to "circumvent the central bank." The bill he proposed was to fix that the supervisor of banks could not make decisions on matters of credit without first getting the approval of the Knesset Economics Committee. Kahlon was joined by MKs from all the parties, from Kadima's Avigdor Yitzhaki, coalition chairman, to National Religious Party chair Zevulun Orlev. What arrogance, what pretension. They'll teach Supervisor of Banks Yoav Lehman a thing or two about banking.
That's all we need - political intervention by MKs in a purely professional procedure. Next they'll pass a law deciding who has the right to credit and how much. Or maybe they'll pass a law saying that the governor of the Bank of Israel needs their permission for any change in interest rates. After all, as is well-known, they are all experts in banking. Luckily, they all failed yesterday in the vote in the Knesset, and the bank supervisor's new order goes into effect on Sunday.
It was funny to hear Kahlon say that he was flooded with appeals from citizens and businessmen who said they would immediately collapse if they didn't have time to get organized before the new regulation goes into effect. After all, it was supposed to go into effect on January 1, 2006 but the supervisor of banks gave the public a six-month postponement - so it could get organized. In other words, there was time, but there was no willingness.
Kahlon, Avraham, Yoram Marciano of Labor, Yitzhaki and Orlev present themselves as people concerned about the citizen who has suddenly been denied overdraft deviations. But the idea was born to reduce the risk in the banking system - and to help the citizen.
Marciano, for example, claims there will be a disaster: "People won't be able to buy bread and milk on credit." He didn't bother to find out that Lehman did not order the banks to reduce credit to their customers but just to set the level in a different manner: organized, by agreement, within a framework.
Indeed, the total overdraft need not necessarily shrink by a single agora, because, first of all, the banks have a surplus of money and they want to give credit more than the public wants to take it. Secondly, it is clear to every bank that if it were to suddenly cut the volume of credit to a business, this would bring down the business, and the overdraft would turn into a bad debt on the bank's books. That's the last thing a bank wants.
The MKs are playing into the hands of the banks. They don't understand that the banks love excessive overdrafts, because they can charge enormous amounts of interest, and that way, instead of the weak "buying bread and milk," they'll be handing a large portion of their wages over to the banks. Furthermore, with the deviation system, the customer was always at the mercy of the bank, never knowing when the bank would start bouncing checks, because it was, after all, a deviation from the credit limit.
The ailment should have been cured long ago. Deviation from credit frameworks is dangerous. A person living beyond his means, handing out checks with complete disregard, pays ever higher interest rates until the bank starts bouncing checks and topples the customer.
But not all the MKs are demagogues. For example, there's Meretz-Yahad MK Yossi Beilin, who spoke against Kahlon's "populist proposal." Beilin said the system of deviations from credit frameworks "harmed people from the weakest sectors, and not those who are strong," and that "the change is important and the fact the state is telling people 'enough is enough' is first of all for the benefit of the weak. Those who think they can help them by postponing the reform, is simply causing them damage."
But who's one Beilin compared to the Kahlon-Avraham-Marciano-Yitzhaki-Orlev crowd?