Fundamentally Freund: From Wall Street to the Knesset

This week, the foundations of our system shook. It's time to step up and fix what's broken.

By MICHAEL FREUND
wall street 224 88 (photo credit: )
wall street 224 88
(photo credit: )
Over the past few days, much of the world's attention has been turned to New York, where the turmoil in US financial markets has created fears of an unprecedented meltdown. With breathtaking speed, the investment bank Lehman Brothers went under, Merrill Lynch sold itself to the Bank of America and the insurer AIG was saved from going belly-up thanks only to a massive $85 billion federal rescue plan. Now, to top it all off, the Bush administration is proposing a series of extraordinary moves that would include the purchase of vast amounts of distressed securities, totaling hundreds of billions of dollars, to stave off further crisis. Needless to say, there is something unnerving, and highly unsettling, about watching a venerable system wobble ever so perilously on the verge of collapse. But Wall Street was not the only major institution to find itself at the brink this week. Israel's democracy had its own brush with a form of bankruptcy, albeit one that was political and moral in nature, as Prime Minister Ehud Olmert submitted his letter of resignation to President Shimon Peres on Sunday evening. After 33 months of mismanagement and malfeasance, there was an almost audible sigh of relief from the public that he was finally leaving the scene. But whatever one may think of Olmert and his personal performance, this was a sad day for the Jewish state. IF OUR task as a people is to serve as a "light unto the nations," a bastion of justice and righteousness which all are supposed to emulate, then how is it that our head of government had to resign under a cloud of scandalous accusations? Sure, we can take pride in the fact that there is an orderly transfer of power and that our democratic system, with all its numerous faults, remains durable and resilient. After all, few else in this part of the world can assert such claims. But that should not deflect our attention from examining the critical question of just how we reached such a low point in our country's history, as the state's top official was consumed by charges of corruption. Don't get me wrong - Ehud Olmert's failings were first and foremost his own doing. But there is no doubt that he is a product of a broken system, one that almost seems to produce corruption and sleaze. This development should shake us all to our very core, no less than the financial upheaval taking place across the ocean. For while the latter may pose a threat to the growth of the economy, the former casts a heavy pall over the integrity of the state and its institutions, which is most assuredly of equal importance. True, the problems plaguing Wall Street and those gripping our political system could not possibly be more different. The financial crunch has to do with such mundane things as falling housing prices and bad debts, which ostensibly have little in common with our local political intrigue. But what the two crises do share is a key, underlying trait: Both are the result of a lack of accountability and proper oversight, mixed in with some plain, old-fashioned greed. In Wall Street's case, recklessness led many firms to over-leverage their positions using risky instruments, leaving them vulnerable once the housing bubble burst and home foreclosures soared. At the time, it seemed like a great way to boost profits, but in retrospect it has proven disastrous. AS ECONOMIST Robert Samuelson noted in The Washington Post the other day, "Every financial system depends on trust. People have to believe that the institutions they deal with will perform as expected. We are in a crisis because financial managers - the people who run banks, investment banks, hedge funds - have lost that trust." The same can also be said for Israel's political system, where a general sense of malaise has set in as people throw up their hands in disgust at our leadership. Sure, every man-made system experiences breakdowns from time to time, but the real test is whether the system can be tinkered with and fixed, and made to work again. In Wall Street's case, only time will tell to what extent it will rebound, but at least America's elected officials are taking the requisite steps to address some of the underlying systemic flaws that led to the current mess. As for Israel, no such radical change is in the offing. There are no calls for reform, no protests against corruption and no demands for structural change in how our system operates. We merely shrug our shoulders passively and watch as a change of personnel takes place at the top, leaving a flawed democracy in place to sputter along. The truth is that Israel's system of government needs a bailout plan no less radical in scope and overarching than that being proposed by the US Treasury for Wall Street. THE FOUNDATIONS of our system shook this week, and it is time to step up and fix it - by introducing more checks and balances on our leaders, insisting on a greater separation of powers between the executive and the legislative branches of government and adopting a more representative and responsive parliamentary structure. It has been said that a nation gets the leaders they deserve. I beg to differ, because I think the Jewish people deserve a whole lot better than what we have right now. We deserve a leadership that will stand firm and proud and defend the nation and its interests, one that will not cower before others. And we deserve leaders who walk in faith with God and uphold the highest ideals of honesty, integrity and Jewish values. We really do deserve such things - but the only way to get them is to speak out and demand them. Unfortunately, the way things look right now, we'll probably have to wait a bit longer until we do.