The Compass Has Gone Astray

Everyone wants Stanley Fischer to stay on as the Bank of Israel governor, but he has one small condition - that Knesset pass the Bank of Israel law within two weeks.

In about two more months, the Bank of Israel governor's tenure ends, and everyone wants him to continue for another term. The finance minister says we don't have anyone else with Stanley Fischer's international stature, and the prime minister considers him an economist par excellence.

But Fischer has one small condition - that the Knesset pass the Bank of Israel Law within two weeks, even before the Passover recess. Fischer says that without the new law it will be hard for him to maintain the bank's independence, so financial stability will also be at risk. The problem is that the law has one clause that must not be allowed to pass in its current form - the wage clause.

Fischer has been dealing with the bank's wage problem since he took office five years ago. The governor was forced to address wage deviations that occurred before his time, but instead of accepting the position of the supervisor of wages and eradicating the ills of the past, he fought with the supervisor. Even after a new wage agreement was reached, wage levels were much higher than those customary in the civil service. That's bad for the economy and bad for equality. But that's what Fischer wanted.

Another problem is that, according to the new law, the task of supervising wages at the Bank of Israel will be taken away from the Finance Ministry's supervisor of wages and given to an external committee with three members, two of them to be appointed "with the governor's consent." If there is a disagreement about the committee's decision, the issue will go to the prime minister for a decision.

Fischer wanted the final decision to be made by the prime minister because he knows that Benjamin Netanyahu, like any other prime minister, won't want to argue with the central bank governor "over a few shekels."

Also, the involvement of an external committee is a classic maneuver by the bank because this kind of committee doesn't have budgetary restrictions or responsibility for wage levels in the economy as a whole. Therefore its members will be able to dish out money with ease, which is the objective, after all.

Yet another player joined in the imbroglio this week - MK Moshe Gafni of United Torah Judaism, chairman of the Knesset Finance Committee. Gafni is supposed to prepare the law for its second and third readings in the Knesset, but someone like him would not forgo the opportunity to charge "passing fees." That's why Gafni said this week he doesn't understand why the government has accepted this bill so enthusiastically when its sole aim is "the appointment of one man," while it ignores another bill that is no less important and aims "to benefit an entire public."

Just by chance, Gafni was referring to a bill he had drawn up himself. That legislation is geared to sanitize the activities of the "Gamahim" free-loan funds that are active in the ultra-Orthodox community; these funds, in effect, would turn into banks that take deposits and make loans without being audited. These institutions would be able to launder funds for dubious money from rich Jews abroad without the Bank of Israel even aware.

Gray banks of this kind are of course fertile ground for acts of fraud and endanger depositors. But instead of the supervisor of banks doing everything possible to thwart the danger, he just weakly objected and allowed the Gamahim law to pass this week in the Ministerial Committee for Legislation. The bank wanted Gafni to be satisfied so he would allow the Knesset to pass the Bank of Israel Law soon. This business smells bad.

And that's indeed what happened. The minute Gafni got the ministerial committee's approval for the Gamahim law, he went to work with surprising alacrity on the Bank of Israel Law.

But Fischer is still not satisfied. He angrily criticizes the treasury officials who are responsible for "leaks against the bank on wage issues." What does he want? That they should eat the rotten fruit and applaud him? That they should be removed from supervising wages and then politely say thank you?

Wages are a very sensitive issue at the Bank of Israel because for many years the bank's employees and directors arranged dozens of wage components and stratagems aimed to raise wages and improve pension conditions - corruptly. That's why the public is afraid - and rightly so - that this could happen once more, the moment there is no oversight by the supervisor of wages.

It is precisely the governor who should understand this problem. After all, his job is to look at the economy in a broad sense and not merely to preserve the narrow interests of the Bank of Israel's employees. The bank is supposed to be the economy's compass and conscience; to warn of economic injustices and acts of corruption. That's why Fischer should have asked for supervision from the supervisor of wages - to restrict exaggerated demands, deviations and corruption.

Gafni said half a year ago that "the auditing of wages must remain in the hands of the Finance Ministry without any exceptions." So it's his obligation to correct the wage clause in the Bank of Israel Law so that power once again will be in the hands of the supervisor of wages, without a committee and without Netanyahu.

That's the only way the Bank of Israel will be able to regain the public's faith. That's the only way Fischer will be worthy of another term in office.