Fischer deflects criticism: I care about young couples
Bank of Israel chief says banks invested heavily in real estate market, adding 'if financial system is weak there are no loans'
Bank of Israel Governor Stanley Fischer countered critics who allege he cares more about the stability of the banks than about social welfare.
"We care about stability because we care about the young couples, and those who are older, and we assume that because they live in the State of Israel they care about what happens in the Israeli market," he said Thursday.
Fischer was responding to claims that he is refusing to support a decrease in apartment prices because he cares more about the stability of the banks than the welfare of Israel's citizens.
On Wednesday the Bank of Israel said the pace of construction in the country should not be increased.
According to the Bank of Israel chief, "50% of all financial crises began in the real estate market, and this is why we will continue to act responsibly with regards to this particular aspect of the market."
Fischer spoke of the importance of a stable economy. "A country that has a weak financial system will suffer greatly from a slowdown or a recession," he said. "Consider Ireland or Spain, the US, and the crises in England and in Asia in the 1990s.
"If the financial system is weak there are no loans, and this is one of the reasons we are very careful with regards to real estate. About 40% of the banks' portfolios are invested in real estate; this is why we are following developments in the real estate market very closely," he said.
The Bank of Israel fears that the real estate bubble will burst and throw the country's banking system into chaos.
"History is full of examples of assets that appeared to be very safe until they stopped being safe," Fischer said. "This is why we cannot let our guard down when it comes to the stability of the real estate market."
