The first safety net: Politicians. Our prime minister Ehud Olmert, that legendary champion of the poor and downtrodden, and the professional echelon at the Finance Ministry, have spent the week snarling viciously at each other over what's become known as the "safety net." While Olmert bountifully scatters promises to rescue every Tom, Dan and Hillel who lost money on the stock market, the treasurymen are fighting to protect the public kitty, to shield Israel's financial foundations and to safeguard economic sanity - not an easy task when the losses of the loudest and strongest bodies in Israel are mounting by the day.
Most people don't understand what the argument is about. The economic and financial issues are complex and the public debate over how to counter the crisis is being conducted at a very low level.
Advocates of using taxpayer money to compensate investors in provident funds seem unaware of a few things.
a. The worst hurt by the situation are the richest people, while the funds for their rescue would come from the poorest.
b. Government intervention in the capital market (for example by compensating for losses using taxpayer money) increases the probability that distortions, bubbles, negligence and outright theft will come roaring back to the market all too soon.
c. Provident funds may have lost money this year but they achieved racked up profits over the preceding 10 years.
d. The losses aren't final. Asset prices rise, fall, and rise again.
One of the reasons Israel is the only place in the world where the government is thinking of using taxpayer money to subsidize losses on the stock market, is that most other countries are preoccupied with far graver problems - collapsing banks and mass layoffs.
Meanwhile, over here, some of the newspapers and media (controlled directly or indirectly by the biggest borrowers in the land) have been loudly touting the use of taxpayer money to compensate investors. Encouraged by the massive intervention of governments in America and Europe, they are conveniently ignoring the fact that the intervention in the west aims solely and only at shoring up the financial institutions, not incautious investors.
Our politicians lost no time weaving safety nets using taxpayer money. Yet somehow they've been neglecting to mention finer cloths from which a net or two could be extracted. Here are three examples.
1. A personal example on the fly: Some of Israel's tycoons who borrowed billions upon billions of shekels from the public through bond issues in recent years seem to have difficulty adjusting to the idea of the ghastly conditions in the first class section of commercial flights. Yet before they help themselves to a single shekel of taxpayer money, perhaps these tycoons would deign to sell their executive jets anyway, and use the money to repay corporate debt. We do realize that the price of these private planes has dropped badly in recent months, but setting a personal example would go far.
2. Imaginary bonuses: Speaking of the wild blue yonder, some of these controlling shareholders who borrowed billions from Widow Cohen et al have been helping themselves to sky-high salaries and bonuses, based on profits that were entirely on paper, or on inflated evaluation of properties. In short, not real money in the bank. Now that these imaginary profits on paper have vanished into the black of night, before Olmert touches our money - they should return the bonuses.
3. Shares and shares alike: Many of these businessmen who borrowed all these billions now causing bankers and bondholders to lose their hair are sitting there waiting for the right moment to leap and suggest an "arrangement" with institutional investors (which are the bodies that manage our money, that invested our money in the businessmen's faltering bonds).
What kind of arrangement? Well, for instance, they suggest that instead of repaying billions of shekels to our pension funds, they'll pay half a billion shekels, which they explain is a very "generous offer" considering the temper of the times.
Put otherwise, these entrepreneurs took advantage of the good times to sell the public merchandise at inflated prices, debt without collateral - and now they're trying to take advantage of the bad times to take another joy-ride on our pension funds.
The institutional investors running our pension funds should state loud and clear, right now, that they will accept no "arrangement," they will write off not one penny of the debt - unless the company owners immediately hand over all their shares in the company first.
How disappointing it is that since his appointment, Braverman hasn't said one thing that so much as smacks of his profession, his knowhow or his record at the Ben Gurion University of the Negev. Every single utterance Braverman has made as chairman of the Finance Committee could have come from any union leader at any of the government monopolies.
It seems that given the structure of Israeli politics and given the method of elections, as the primary nears, the differences between a professor of economics and a firebrand labor leader disappear.
That's because they share the same goal: winning the support of the thousands and thousands of workers at the Israel Electric Corporation, Mekorot water utility and the Israel Military Industries.
Seemingly, everybody stands to lose from the situation: The economy cannot grow to its full potential, the quality of government management is poor, social gaps are widening and the quality of education is deteriorating.
But it isn't true. Not everybody loses.
The gainers from the bedlam include the local oligarchs looting consumers through the monopolies and milking the state; and all the fat cats of the public sector, living high on the hog and paying not a cent into their own pension arrangements. No, the rest of the people of Israel pay for that.
Some of the rest of the people lived perfectly well during the last five years as the global economy boomed. They won't be doing so well next year. Maybe some of these people will start to wonder how long they're willing to continue sacrificing their standard of living on the altar of these oligarchs and public sector fat cats making hay in the black vacuum of leadership.
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