Jewish Banking

By Moshe Feiglin

4 Tishrei, 5771
September 12, '10

Two weeks ago it was announced that Israel's Bank Hapoalim surprised all the analysts and posted a quarterly net profit of 513 million shekels. In other words, half a billion shekels plus 13 million shekels net profit for three months.

I have nothing against Bank Hapoalim. On the contrary, their commissions are cheaper than the other banks and I am pleased that they are making a lot of money. Everything written in this article pertains to all the large banks.

Something bothered me when I listened to the report of Bank Hapoalim's profits. The bank's economists explained that the surprising increase in profits actually stems from the large reduction in the debts of its loan recipients. In other words, the bank's increased profit is not because it is more efficient, but rather because we, its clients, have been more efficient in paying the bank interest on our loans.

What is the problem with that? Most of the large banks' revenues come from private households. The Mizrachi Tefachot bank, for example, boasts that over 60% of its revenues are from loans and mortgages to private households. They are proud of this fact because loans to private households are considered safe.

As we all know, a private household is not a company Ltd. It consists of people, unlimited. Most of the families in Israel live in chronic overdraft and likely pay a month's salary in interest on their overdrafts annually. Simply put, the huge profits of the banks come from the biting interest paid to them by private households.

Banks have an important role in society by virtue of the fact that they are growth engines. In other words, banks are supposed to give loans to businesses, not to individuals. When an army veteran who wants to establish a business can get a loan from the bank at a reasonable interest rate that will allow him to stand on his own two business feet, return the loan and continue to make money - the bank has done an important service.

In addition, the large banks help us to administer our money. They take a commission for this, which is fine. After all, nobody wants to stand in line and get sacks of money on pay day, like in the old Westerns.

But the banks reap only half their profits from the above admirable services. The big money comes from the "pushovers" who are enticed to take out loans for their household needs or who go into overdraft. The banks do all they can to convince their customers to do just that.

And what is the problem with that?

When the bank makes a loan to a household, it is no longer an engine for growth. Instead, it becomes an engine for servitude. By the way, the interest on a bank loan to a private household is three times higher than the interest on loans to business clients. While the households are safer loans, they are also weaker. And if you are weak, more money can be squeezed out of you.

And what is the problem with that? After all, nobody is forcing people to take loans.

The problem is that it is not Jewish.

What?

It's not Jewish. It is forbidden by the Torah. Read it for yourselves.

" If you lend money to my nation, to the poor person with you, do not be a creditor to him, do not put interest upon him."
And:
"Do not take from him interest and annuity, and you shall fear your G-d, and your brother shall live with you."
And:
"You shall not charge interest of your brother, interest on money, interest on food, interest on any thing from which interest can be taken."

There are many more examples. Interest is a serious prohibition.

Even if the customer chooses to pay interest?

Yes, the prohibition is for both the lender and the borrower. Both the bank and its overdrawn customer transgress the prohibition against interest.

But we saw a rabbinic document on the wall of the bank, called heter iska. Doesn't that solve the Jewish law problems?

And if I serve you a glass of sewage water that has been purified, complete with the authorization of a laboratory - what would you prefer - the purified sewage or authentic spring water?

The heter iska may solve the problem, but it is not in keeping with the original intention of the Torah. Because in truth, there is no business partnership involved here. When a bank makes a loan to a private person, it simply becomes a creditor of a loan with interest.

Does this mean that religious Jews don't go into overdraft?

Not at all. When it comes to national conduct outside the parameters of religion, the religious Jews are just as disconnected from reality - a.k.a. G-d - as are their secular counterparts.

The Torah was given to the Jews so that we would create an all-inclusive culture of liberty based on its tenets - in the Land of Israel. But when we were exiled from our Land, the Torah contracted from a culture to a religion. In the exile, there are no Jewish banks and the Rabbis had to invent all sorts of solutions that would allow the Jews to survive in their unnatural surroundings. The problem is that although we have returned to our Land, we still cling to the laws that were written for the exile and have not yet re-vitalized the Torah of the Land of Israel.

The people who established the State of Israel were not looking for a Jewish model of national conduct. They preferred the European model. That is how the nation that was the harbinger of liberty for the world became the world leader in subjugation to banks.

Do you really expect banks not to take interest?

I expect that they take only commission for services rendered for private customers.

Who would open a bank under those conditions?

A profit of one quarter billion instead of one half a billion is not enough?

And how will we manage without overdraft?

We will gain a full month's salary every year.

And if we need an urgent loan or mortgage?

For that we have free-loan societies. Jews know how to help each other -without interest.