Taking Stock / Whose Money Is It, Anyway?

Voluntary regulation has failed. It's time for the regulators to remember who they are and what their job is.

They want us to think that the milk has already been spilled.

They would like us to confine our attention to questions such as how to stimulate the economy, how to create jobs, how to inject liquidity into the market and how to restart lending again.

They tell us this isn't a time to look backward, to name culprits: We need to look ahead and act, fast.

They tell us that the house may be burning down but don't want us to ask questions: just spray the fire with government money, pour it like water into the bondholders, into the banks, into government grants, sprinkle it on infrastructures.

Yes, they want you, the Israeli investor, the Israeli pensioner, to take your losses like a man. To say, that's how it goes in the free market and everybody has to bear the "burden" of the crisis.

Yes, they figure that you and everybody else are morons, that we haven't figured out that there's some milk left, and that the real battle hasn't even begun.

The big battle will be over how the losses are going to be divided: between the few who lost a lot but have a lot left, and the many who lost the little they had. The big battle will be over how the profits are shared when the rebound comes.

Some of them already have a plan in hand. They ripped you off during the good times and now they mean to screw you twofold come the bad times. Since we're a business section, we have to confine ourselves to terms like "rip off" and "screw" though there are much more appropriate expressions in the argot of the streets.

Under the cover of the financial markets, they managed to sell the illusion that it's their own money they're playing with, and when the bad times came, something came to light that should have been obvious all along - it was your money.

Don't get it yet? The so-called "tycoons" don't own most of the assets listed in their balance sheets. They may own 10% or 20%, or as little as 5%. Almost all the hundreds of billions - billions - of shekels listed in the balance sheets of the banks and big corporations belong to the general public: to investors, depositors, pensioners. Only a tiny proportion of those hundreds of billions belongs to the people considered to be the rich men of the land.

Shari Arison, Nochi Dankner or Lev Leviev don't really own as much wealth as people think.

In their hunger to own more and more, to make more and more money, they may have taken over companies, bought banks, issued and floated - by borrowing. They borrowed tens and hundreds of millions of shekels from the public, from investors.

So, they don't really own as much wealth as people think. They own a small part of it, and are the managers and trustees of the rest. That wealth belongs to the public.

As trustees of public money, they have to explain the management fees they charge, their considerations when making decisions: in short, how they're protecting our money.

The ones supposed to supervise their actions and protect the rights of the real owners of that wealth (us) are the bankers, the mutual funds, the provident funds and the pension funds. The problem is, they're a forgetful lot and tend to forget who they represent. It is time to remind them.

If you expect market forces to make sure that the institutional investors will make sure the company managers will make sure our money is safe - forget it.

It's too soon to say what lessons the financial crisis and global recession have to teach us, save one: If the free market is left to its own devices, the results can be devastating.

In the last eight years, the U.S. government systematically destroyed regulation governing the financial markets and business sector. George W. Bush advocated a minimum of regulation, and created the conditions for the most unfettered revelry in history.

In Israel, many followed Bush's path. Through media outlets they controlled, directly or indirectly, they attacked the regulators, contemptuously consigning them to the level of "petty bureaucrats" in order to fool the people.

For years we at TheMarker have been calling for "violent regulation" of the capital market and business sector in Israel: violent regulation by the Israel Securities Authority, the Antitrust Authority and the mechanisms supervising the capital market.

But the regulators themselves capitulated and placated. And some of the tycoons turned weak regulation into a whole ideology: "voluntary regulation," they called it.

Now the regulators are scurrying like rats in a trap, frantically trying to sew up "safety nets" and "rescue plans" to save the economy.

These are all tourniquets trying to stop the bleeding. They are not cures.

The financial crisis is a one-time opportunity for Israel's regulators to declare a new policy, of violent regulation over Israel's free market.

Even Alan Greenspan, the former Fed chairman, who for 50 years unwaveringly believed in the market's ability to regulate itself - has now admitted he was wrong.

Instead of thinking up weird ways to harness taxpayer money to hamstrung rescue plans, the regulators should be thinking up ways to stop the free market from mutating into a monster.

Wake up, regulators: voluntary regulation has failed. Your job is to protect the real owners of the wealth, to give us tools to protect our property, to force proper behavior on the trustees controlling our property - the "tycoons" who managed to make us all forget whose money it really is.