Price stability, control of the money supply, advancing foreign exchange reform, encouraging the government to advance market reforms, employment, and growth are only a partial list of Bank of Israel's mandates. The former fall under the category of actual authority, while the latter are more matters of influence.
Like other central banks, in order to carry out policy in these areas, Bank of Israel hires the brightest economists to use the finest monetary instruments.
Bank of Israel is therefore one of the best, if not the best, pool of professional economists, particularly monetary economists. Bank of Israel's economists ponder monetary quandaries morning, noon and night ¿ alone, just them, occasionally sharing their thoughts with an elite few others. That is how it is done the world over and that is how it is done in Israel and that is apparently the best way to manage monetary policy ¿ in private.
In all things having to do with the instruments at Bank of Israel's sole disposal, it works alone, possibly consulting a few outsiders, but deciding alone, acting alone. The number of people with direct influence over ongoing monetary policy is small and all of them are Bank of Israel employees. And no one could do it any better.
But above and beyond those direct monetary instruments, in order to realize its goals Bank of Israel must sometimes fight the outside world, namely the Ministry of Finance, but also other ministries, sometimes even the Prime Minister's office, and the Knesset.
Bank of Israel must play the political game if it hopes to convince the Ministry of Finance to expand the fluctuation band, or pressure the Prime Minister into a budget cut, or when it wants to protect the confidentiality of bank customers as the Knesset Finance Committee debates the Credit Data Law.
The heads of Bank of Israel know the political game intimately as well as its various arenas: ministers' offices, the Prime Minister's office, Knesset committee meeting rooms and even the offices of Knesset committee chairmen and the MKs themselves.
The central bank's leadership are also familiar with the public arena where they stand in front of microphones and cameras and tape recorders and get their message across to six million citizens. Bank of Israel has been playing that role for years, and, some say, playing it well.
Bank of Israel knows how to work alone both in internal professional matters and in influencing people and entities.
However, now we learn there is one task for which Bank of Israel needed outside help. The central bank chose to pay NIS 1.1 million to Concord Consulting and the Policy lobbying firm for services that would help it further its own stance on the Bank of Israel Law and the Council of Governors.
Why does a concern hire outside help? One reason is that the task is just not its area of expertise. Obviously if Bank of Israel wanted to build a building, Governor David Klein wouldn¿t be hammering nails.
Is advancing the bank's position on the Bank of Israel law and the composition of the Council of Governors beyond the bank's scope? Not necessarily. The decisions must be made on an economic basis, which is exactly what Bank of Israel knows how to do. The tools are political, and Bank of Israel's leadership certainly knows how to handle that ¿ be it in the Knesset, the cabinet or public opinion.
Another reason to turn to outside assistance is the importance attached to the matter at hand ¿ the more important, the more resources and effort. If that is the case, does it mean that Bank of Israel¿s status, power and influence, the scope of which will be determined by the very legislation the bank hopes to sway, outweigh monetary policy, fiscal procedure and the state of the Israeli economy?
Another reason could be priorities ¿ the bank's leadership could prefer to invest its own time in managing monetary policy. But is this legislation really more complex and demanding than advancing reforms? Because if it isn't, why didn't Bank of Israel hire lobbyists to push reforms? Is it more complex than expansion of the fluctuation band and eradication of limitations on Bank of Israel activity in the short term debt market? Bank of Israel worked long and hard for those two recent accomplishments. And worked alone.
The governor's much-discussed jeep and the bank's decision to hire lobbyists have something in common. Bank of Israel's heads enjoys comfort, power, status and influence, and are sometimes willing to go to great lengths to achieve them. Sometimes to even greater lengths than those they are willing to invest in advancing their sanctioned economic goals.