Taking Stock / Bachar's Big Bang

The Big Bang refers not only to the theory of creation, but also to the 1986 reform in London, in which the stock exchange was automated.

While the reform of the LSE addressed that exchange's unique problems, its goal was much the same as that of the Bachar reform: to free the market of the shackles that hamper its development and allow it to burst ahead.

Eighteen years later, London is the world's second-most important business hub. Without the Big Bang, it would never have happened.

Probably even 18 years wouldn't suffice to make Israel an international business hub. The goals of the reform presented on Monday were more modest: to close the gaps that developed over the decades between the capital markets here and in the rest of the world.

The presentation of the report, compiled by an inter-disciplinary team headed by treasury director-general Joseph Bachar, was an event of historic moment for Israel's economy.

Never before had five different arms of government, each highly opinionated and powerful - the Finance Ministry, the Bank of Israel, the Israel Securities Authority, the Justice Ministry and the Antitrust Authority - teamed up to brainstorm a problem and find a solution to which all were committed.

On the contrary, Israel's macroeconomic history had been rife with spats between the regulators. The nation had been pulled by differing policies and philosophies, opposing strategies, colliding agendas, cowardly bureaucrats terrified of the rich and powerful and, mainly, spasmodic ideas doomed to wilt and die.

The A+ team

The Bachar team avoided all those pitfalls. The highest-ranking experts in government - economists, accountants, lawyers, experts on banking, financing and the capital market - discussed the issues thoroughly.

The team members were the cream of the cream, people who had devoted their professional lives to economics and the capital market. Not their aides, the leaders themselves.

And behind these men stood not only their own extensive personal experience, but also their entire institutions. All the economists and watchdogs of the Bank of Israel's supervisor of banks, all the legal experts at the justice and finance ministries, and all the capital market mavens at the treasury's commission supervising insurance and the capital market.

Unlike previous panels in Israeli history, the Bachar team was manned by objective people whose sole interest was the public's greater good.

Yes, they had a personal interest - to protect their reputation. But, if anything, that impelled them to compile a reform that would be brave, clever, fundamental, balanced and feasible.

The reform the Bachar team designed is dramatic. It will detach the banks from the capital market, creating an entirely new market architecture.

But the most powerful people in the land have lined up against the Bachar commission: the bankers, the banks' shareholders and their friends, who among other things wield influence at the Prime Minister's Office.

A crying need for reform

The power of the panel derives from its professionalism and from the unshaken belief of the team members in the model they have created. Finance Minister Benjamin Netanyahu put it well when asked what the reform's chances are if he resigns.

"It is ripening," he stated. "By now everybody understands the crying need for this reform."

This is not a matter of some reform-crazed underling or even a minister; this is sweeping acknowledgment that 55 years after Israel's establishment, and 21 years after the banks collapsed in disgrace, it is time for the State of Israel to have a proper capital market.

A nice surprise

The biggest positive surprise regarding the report involves the man who led it - Dr. Yossi Bachar, the director-general of the Finance Ministry.

We must admit, when we first met him, during his first months on the job, we were skeptical. We feared the associations he nurtured during his many years of work as an accountant and adviser to the bankers and to other wealthy and powerful men might hamper fulfillment of his duty to the public.

With uncharacteristic frankness, Bachar disclosed on Monday that he had also recoiled when presented with the concept, which had been lying around closed drawers at the Bank of Israel and Finance Ministry for years, of divorcing the banks from the capital market. Complete, utter detachment.

But he studied the issues, he delved and dredged, and the more people he met with and the more he learned, the more convinced he became. "I was skeptical, too, but I saw you can't argue with the facts," he concluded.

Armed with amiable comportment, Bachar managed to usher the seven brilliant egomaniacs around the table into an accord, the Bachar report, which all support.

But now the government and Knesset have to vote. If Bachar manages to push through his reform, absolutely detaching the banks from their provident and mutual funds and changing their model of fees, then he can write in his resume: While at the treasury, I led the biggest reform in the history of Israel's capital market. Indeed, one of Israel's biggest economic reforms ever.