Tzfas Sephardi Chief Rabbi Shmuel Eliyahu Shlita in his address to the Ramle Conference called for canceling the “heter iska” for banks and for Israel’s banks to follow the working model of Islamic banks. To the skeptics, Rav Eliyahu explains many warn that if the heter iska is canceled the nation’s banking system would collapse. He says this is not so, adding the Islamic banks today handle $300 billion of the world’s economy annually and they are not collapsing. He questions why a bank manager must earn $2 million annually while the very same bank is evicting a family that cannot pay its mortgage. The rav stated the Islamic banks make a living from investments and bank charges and not be oppressing people.
“We as rabbonim play a role in this and we must shot ‘enough’ and retract the heter iska. He feels senior bank officials should be hiding their heads in shame regarding their exorbitant salaries. He calls the inflated salaries “immoral” and insists they are paid on the sweat and blood of the working people. He cited that banks continue to hand out dividend checks to share holders are working families are being thrown into the streets by mortgage banks.
(YWN – Israel Desk, Jerusalem)
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10 Responses
If the rav doesn’t want his followers to do business with these banks, thats fine. Let them cut up their credit cards, withdraw whatever savings they may have on deposit and pay off their loans and mortgages and take their business to new Chareidi banks that follow the Islamic model of banking. His comments about excessive bank compensation and exploiting working people sound more like some communist MKs than a respected Rav. The banking system in EY works just fine and meet all of the new Basel III banking standards for risk management and capitalization. He should encourage some of the wealthier Chareidi tzibur to open new banks that adhere to hit business model.
Amen….Rav Eliyahu is always just to the working people.
He is of course correct, but don’t tell the Ayn Rand admirers who comment here.
The banks don’t take the Heter Iska seriously. They advertise that they charge and pay interest. Most of the Islamic methods of avoiding “interest” are equally fraudulent. Instead of trying to avoid halacha, they should take advantage of banning interest.
Banning ריבית would mean that a lender (such as a bank) would get paid after other creditors (as a true partner) rather than before any other creditors (such as employees, suppliers and tort victims). It would eliminate the reckless behaviors that caused the recent world wide financial crisises.
Why is there a NEWSMAX link to this page on this site?
Bible Verse Contains Hidden Healing Code
It is a link to something about a cure in the Christian Bible.
This does not belong on a Jewish site. And certainly not on “Yeshiva” World News.
Great idea, but will probably get nowhere. Money talks.
Now that a REAL jewish leader.
Tackling real issues of how a Jewish State should run.
Kol Hakavod
I can’t imagine that this post correctly articulates the point the Rav was trying to make…
1. The “Islamic banks” have the same issues as our Heter Iska.
2. Abolishing interest would mean all loans would be “limited partnerships”, and corporate bonds would have to be in the form of “Preferred stock” .
3. The primary difference of replacing debt with equity is that “owners” get paid last when the business fails, whereas secured creditors get paid first – and by forcing professional lenders to have more “skin in the game” they will act responsibly our of self-interest (i.e. no more NINJA loans, ever – except as an act of interest-free tsadaka).
Central Banking is an evil institution. It is empowered by the government, through legal tender laws, to quite literally create money out of nothing. Even worse, money is LOANED into existence, at interest. Were all the debts of the economy actually paid off, there would be no money circulating. Let that sink in.
It is inherently dishonest money. The rav is right that the salaries are obscene. They are, but not because of assertions of communist thinking and the like. The financial sector in any economy is by definition parasitic. Its only purpose should be to foster productive economic activity. For that, historically, banks could reasonably earn roughly 5% of all the profit in an economy (a very generous amount too, given their function). However, the banking sectors in most economies with central banks, particularly the major ones, are siphoning off 20, 30, even more percent from the productive economy. This is avaricious beyond belief, and ultimately unsustainable. This legal theft has blown bubble after bubble.
Ending heter iska for real would be a death blow to the Bank of Israel (good riddance!). Banks could no longer profit by loaning money into existence at interest. Price inflation, fueled by monetary inflation, would cease immediately.
Since the government would not want to lose control of money entirely, it would almost certainly be forced to redefine the shekel as a hard currency, namely the historical silver shekel.
Given how tied up money is with sovereignty historically, I would say such a move, were we to see it happen, would be a major advance towards the geula.