I assume you did this because you wanted your bank to have better worker-owner relations, but also because, as a public-spirited person who donates much of her family’s fortune to charities, you wanted to demonstrate that the rich are not all bad or hard hearted.

If this is true, you might also care enough to consider the propriety of only four entities – your family, the Arisons, together with the Ofer and Dankner families and Bank Le’umi – controlling over 40% of all private assets in Israel and over 80% of all private financial assets. In 2001 the combined assets of Hapoalim, Leumi and Discount were over 140% of Israel’s GDP, compared to 8% of GDP for US banks and 39% for the highly concentrated (and therefore deeply troubled) Japanese banking industry. Besides its being an unheard of concentration of economic power in a supposedly Western-style democracy, this monopolistic concentration has had, and continues to have devastating effects on the competitiveness of the economy and on most Israelis. It may also finally ruin your business.

Many serious economists fear that the banking duopoly that enables your bank to make excessive profits on retail banking and credit card clearing may finally backfire. It has been proven again and again that the short-term benefits of a monopoly lead to complacency and the erosion of the monopoly’s competitive ability. Bank Ha’poalim’s huge load of questionable debts shows how self-destructive monopolistic habits can become.

Looking at the huge spread between interest charged by the banks to households and the interest they pay to savers, it is clear that the banks pay savers less than market rates. This results in the transfer of billions of shekels annually from low and middle- income saver to the few families controlling the banks. Under the discriminatory rules and practices governing the banking industry this may be legal, but ethical?

Worse damage is inflicted by the banks through the misallocation of credit. As we learn daily, the bank oligarchy chose to give much, if not most of its credit to the few families who dominate the Israeli economy, with whom the banks frequently have interlocking business relationships. It is increasingly apparent that these loans were not prudently made according to standard business practices dictating the spread of risk and the securing of reasonable collaterals. Massive default on these loans may again put the banks in jeopardy and force the government to come to their rescue by spending billions of taxpayer’s shekels. The banks bailout after the 1982 share scam collapse cost Israelis not only many billions but also a decade of non-growth.

The reason the banks can get away with repeated reckless behavior is that the Israeli banking oligarchy has enormous political clout and is, in effect, above the law. Labor and Likud are in hock to the banks, and Knesset members often get banks loans for their primary campaigns and are reluctant to legislate any reform that the banks oppose.

As a result, the banks are able to dictate the rules governing their operations, and when and how they are enforced. Our Byzantine banking rules are very useful in scaring away competition, but the banks easily evade or finesse them.

Bank regulators are lax, some claim, because they eventually end up working for the banks, enjoying sky-high salaries and millions in perks. More importantly, the banks fear no competition. Somehow, charges, commissions and the interest they pay depositors are “spontaneously” almost identical among all the banks.

A 1995 Brodet Commission report on High Concentration in the Israeli Economy reiterated warnings already included in the 1986 Beijsky commission report about the undue influence powerful economic interests have on the state. It added, “extraordinary economic concentration endangers the proper functioning of the economyג€¦(and) economic stabilityג€¦ raises pricesג€¦ deters foreign investors and enables those in control to extract monopolistic profitsג€¦ this is especially true for conglomerates affiliated with the banksג€¦”

The putative privatization process only increased concentration and reduced competition. Most “privatized” government assets were sold to a few families who received unlimited credit from their banking cronies for dangerously leveraged buyouts.

The allocation of most credit to few families meant denying credit to small and medium businesses, the chief engines of economic growth and employment. It has especially negatively affected the periphery, the Negev and the Galilee, and is a major cause for their lack of development.

All this may sound abstract, but economic concentration cause tangible hardships for most hard working Israelis. Not only do inefficient monopolies inhibit economic growth, drastically reducing employment prospects and wage levels, but they also impose a heavy burden of monopoly surcharges on consumers, between 30 to 50%, on what people pay for clothing and shelter, for implements and cars, for education, health, water, electricity and credit, in short for everything.

Do you think, Mrs. Arison, that families who struggle to make ends meet on a few thousand shekels a month should pay close to half of their measly wages to make the rich richer by being forced to pay these monopoly costs? Do you believe this is fair, or tenable?

When your late father returned to Israel as a hugely successful entrepreneur it seemed one of his objectives was to help transform the Israeli economy and make it more open, productive and fair.

Here is your opportunity, Mrs. Arison, to fulfill your father’s vision and perhaps also save your enterprise. You could convince your bank managers to agree to the separation of your retail banking from all other operations that represent a clear conflict of interest, to agree to split some of the provident funds as independent entities, thus creating vital competition in financial markets. This will be eventually good for the banks and for Israel and establish your family’s name as true economic pioneers.

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