Two weeks have passed since

Industrial Development Bank (TASE:

INDD.GG

) collapsed, yet opinions still differ on why. Meanwhile, the central bank has been forced to stream Industrial Development Bank a billion shekels to keep it afloat, and the banks the big ones supposed to buy its credit portfolio, and the small ones fearing the same fate are following developments closely.

Generally, the banks blame the affair on Industrial Development Bank itself, for its abandoned credit policy. Some claim the bank was damned by its policy of lending almost exclusively to industry coupled with the recession.

But almost everybody agrees that its liquidity crunch was caused mainly by a combination of factors: media reports on its difficulties, and the crisis of confidence in the Bank of Israel and government that developed among its depositors, who set off a run on the bank.

Although the banks are still arguing about causes, there's someone out there who evidently knows exactly why Industrial Development Bank collapsed, and who to blame. That would be the "government sources" quoted in the press yesterday. Despite their insistence at being quoted using that alias, it is perfectly obvious that so-called Government Sources is not far from the Prime Minister's Office, or Finance Minister Silvan Shalom.

These "government sources" claimed late last week that Bank of Israel governor David Klein failed to advise the prime minister of Industrial Development Bank's grievous condition. We are to understand that if Klein had done so, the bank wouldn't have crumbled.

But wait a second. Last week, it became apparent that the Bank of Israel had sounded the alarm, stridently, about Industrial Development Bank. The Supervisor of Banks, Yitzhak Tal, had even written an official letter to Finance Minister Silvan Shalom, three months ago, explicitly warning that the bank's condition was grave, that its liquidity had substantially weakened, and that the Finance Ministry had to take urgent measures. So what exactly are the "government sources" complaining about?

Well, the "government sources" do not deny that there were warnings from the Bank of Israel, nor do they deny that the Supervisor of Banks met with the treasury people, nor do they deny that Tal sent that letter of warning to the finance minister on May 28.

The problem, they explain, is that in the meeting the prime minister held on July 18 with the Bank of Israel governor and finance minister, Klein neglected to repeat the warnings about the bank's problems.

Why should he have? That July 18 meeting was devoted to economic developments. Shouldn't the letter that the Supervisor of Banks sent in late May have sufficed? Why, in the meeting on July 18, when discussing macroeconomic issues, should the governor have reiterated the warnings about Industrial Development Bank?

And if he had? If Klein had repeated every word that Tal wrote in that letter to the finance minister, would that have assured that Prime Minister Ariel Sharon would have acted immediately to assure the bank's stability? After all, just two months beforehand, Sharon had approved the appt of Dr Ra'anan Cohen as chairman of the hapless bank a man entirely devoid of banking experience. It is hard to believe that the principles of stability and proper banking procedures burn in Sharon's bones.

But the truth is that all those questions aren't worthy of answers anyway, even if some are rhetorical because the basic claim of the "government sources" is so fundamentally bizarre.

Um - but it was your bank

The argument about the Bank of Israel's role in the fall of Industrial Development Bank distracts attention from the fact that the bank belongs to the state, and is managed by directors and managers appointed by the state.

Beyond the fact that the prime minister and Industry and Trade minister appoint most of the bank's directors, another figure on the bank's board until May was none other than the deputy accountant-general of the Finance Ministry.

Meaning, the claim of the "government sources" goes something like this: "The Bank of Israel didn't remind us again and again about the bank we own, the bank we run and on whose board our representatives sit".

Or, to put it more succinctly: "The Bank of Israel didn't warn us about ourselves".

That could actually set an intriguing precedent. Every time the government does something silly regarding the economy and it has on many occasions in the last year it can immediately cast the blame on somebody else: the regulators, the auditors, the press, the rating agencies or the analysts, those dogs who neglected to diligently protect the government from itself.

We must therefore do our part! We must lend our oar to propelling the government's boat and offer a few general warnings that the prime minister and "government sources" should factor into their considerations:

• The entire Israeli banking establishment is in vulnerable condition. Unless stability is restored to the financial markets, and a way found to secure the public's deposits, additional banks could get into trouble.

• Israel's currency market is also in delicate condition. Unless the Knesset carries our budget cuts and restores the deficit to a downward trend, a rush for the dollar could develop, which will undermine stability.

• The business sector is weakened. The inflated deficit, rising taxes and toll of terrorism will cause another found of bankruptcies and layoffs, and the worst is yet to come.

Government sources: The marketplace is moving in the wrong direction, the situation is pretty tough, and it may all end badly. Consider yourselves warned.