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After a thorough investigation into why Israel's provident funds suffered serious losses as stock markets worldwide collapsed, the guilty party has been named: Joseph Bachar. Dr. Bachar, as director general of the Finance Ministry had, after all, led the Bachar Committee, which forced the banks to sell their holdings in provident and mutual funds. And, fact: The global crisis (and local troubles) began only after the "Bachar recommendations" were set in place.

We are to understand that if we can wedge the genie back into the bottle, meaning, return the provident and mutual funds to the warm embrace of the banks, share prices will stop falling. Once the funds are saved from the irresponsible management of the insurance companies and private investment banks and restored to the excellent management of the banks, all will be well.

That patently absurd argument relies on the concept that Competition is Bad and Decentralization is a Disaster. The concept concludes that it's better to have two Big Banks (Hapoalim and Leumi) in complete control of the capital market from every possible perspective, calling the shots regarding our deposits and savings and lending money. The banks are best, according to this world view.

True, the banks bought especially risky U.S. bonds and were forced to write-off more than a billion dollars. They also lent money to every snot-nose who sauntered in with a house of cards presented as a potential castle. But when it comes to managing our money, clearly, there's nothing like those wonderful banks.

Actually, there is one institution that's even better: the government. Yes, that same government whose every move we complain about. Apparently, though, it's a whiz at managing banks. Therefore, according to this same intriguing set of concepts, it would be best for the government to partially nationalize the Israeli banking system. Then we can all sleep tight, with Ehud Olmert or Rafi Eitan at the wheel.

Let's take a nostalgic trip back to those glorious days when the banks did own the provident and mutual funds. They treated the funds as their private fiefdom. When concern began to arise that a customer company might default on a loan, they'd underwrite an offering for it and help it to issue bonds that they'd then cram into the portfolios of the provident and mutual funds they controlled. The company would then use the money it raised to repay the bank. It all worked out wonderfully. True, the clients would get shoddy paper in their portfolios, but the bank's profit was kept safe.

Let us also not forget the bank share crash of October 1983. That occurred after the banks used their provident and mutual funds to manipulate the market. The funds bought shares of the banks in complete disregard of the greater good of investors. When the crash came, the treasury spent $7 billion nationalizing Israel's collapsing banks.

That is why the Bejsky Commission ruled in April 1986 that the provident and mutual funds had to be extracted from the banks' control, to prevent a similar catastrophe in the future. It took 20 years for that recommendation to be executed, thanks to the tremendous clout of the banks. And who finally executed that ruling? Joseph Bachar.

Then there was 1993, when the banks urged loans on the public so that they would invest in mutual funds. A year later, the market crashed and the public was burned.

In mid-1996, the public started to dump investments in provident funds after learning that the funds were losing money. Finally, the Bank of Israel intervened, laying out a safety net for the banks by buying bonds on the market. It cost the state NIS 1.5 billion.

Also, Bachar's detractors forget that the provident funds took their assets out of government bonds and invested in (riskier) stocks and corporate bonds - before the banks sold the funds. That transition merely culminated a process begun 20 years before, in 1987, well before the insurance companies bought the funds from the banks.

Some argue that the banks should take back the provident funds, which should invest only in government bonds. They fail to understand that such a move would force the government to enormously increase its deficit each year, to supply the new bonds to the funds. Then the government couldn't manage its budget responsibly, which means keeping its deficit low. It is beyond absurdity.

Nor is safety to be found in government bonds. These people don't see that the funds mediate between the citizen who wants to save, and the entrepreneur who wants to invest, over the long run. Without these funds, there would be no growth. Without economic growth, the government's promise to pay our pensions in the future would be empty. Also, if the Bachar reform is rolled back, we'll get less interest on our deposits and will pay higher interest for credit, because competition between the banks will diminish.

But the strongest argument in favor of maintaining the Bachar reform is risk diversification. Today, corporate Israel gets half its credit from provident and mutual funds. Six years ago, they were confined to the banks.

Back then, in 2002, Israel was in the throes of recession and the man who was then governor of the Bank of Israel, David Klein, even warned that the fall of a major bank was not unthinkable. That was because the banks were the sole source of credit, and the recession threatened the big borrowers, and through them, the survival of the banks. Happily, in 2003 the economy began to rebound.

Now, in 2008, as the banks are splattered by the storm waters of global crisis, they're standing on stronger legs. They're responsible for only half the borrowing to corporate Israel. Their losses, as corporate Israel suffers, will be smaller.

Our banks are stronger today, thanks to Joseph Bachar. He is innocent of the charges.