Even those who assiduously follow news from Israel would never guess that this week Israel’s Knesset’s Finance Committee is deciding on an issue with momentous consequences for the country’s economy, society, and even security.

As usual, the press, both in Israel and abroad, is so preoccupied with the putative peace process that they overlook the dramatic effort by Finance Minister Benjamin Netanyahu to liberate Israel’s stagnant economy from the stranglehold of a bank duopoly that has damaged Israel’s economy more than the Japanese banks damaged Japan’s economy. Should Mr. Netanyahu succeed in overcoming the enormous resistance mounted by a powerful bank lobby, and should the reform be ratified by the Knesset, the Israeli economy could soon take off, and within a decade Israel could be counted among the world’s 10 richest economies.

The Knesset committee is debating a law submitted by the Ministry of Finance that will force the banks to shed off the provident funds (limited-term pension funds) and mutual funds they now own, despite serious conflicts of interest. The selling off of these funds, which manage 270 billion shekels out of 1.5 trillion shekels of public savings (of which the banks control 1.2 trillion!) will introduce new entrants into Israeli financial markets which currently suffer from lack of competition and gross inefficiencies.

As was explained in a June 27 New York Sun editorial, the failure of the Israeli bank duopoly to provide Israel with productive investments resulted in two decades of low growth and deepened a six-year recession. In fact, in the 20 years following their notorious bank share manipulation, from which the government had to bail them out, with a loss to the Israeli taxpayers of many billions of dollars (in actual costs and in lost growth), the bankers brought the Israeli economy twice more to the verge of collapse, last time on the eve of Mr. Netanyahu’s becoming finance minister. Yet they managed to resist proposed reforms that would break or limit their monopolistic power, by employing their strong political clout. Until recently, the two major parties, Likud and Labor, owed them a mint, and individual Knesset members still need bank loans to finance their primaries.

During the current debate over financial market reform, the bankers swamped the daily meetings of the 18-member Knesset Finance Committee with at least 40 representatives, top executives, lawyers, accountants, lobbyists, publicists, p.r. persons, and aggressive bank union representatives.

The lawyers, the country’s top, and the other banks’ emissaries, gave testimony that distracted, frightened, and confused the Knesset members by misrepresenting and inflating trivial procedural issues and by spinning complex legalistic sophistries. The bankers’ representatives took copious notes of the deliberations and next flooded the committee members with hundreds of pages of “corrections,” objections, and whatnot.

While the bankers kept “threatening and bullying the Knesset members,” Guy Rolnik, the courageous Ha’aretz economic editor noted,”… there is not one single public body that represents the banks’ clients interests in the Finance Committee,” (Mr. Rolnik was among few in the media to take on the bankers, who provide the media with most of its advertising revenue.) The Manufacturers Association, the Chambers of Commerce, small businesses, and independent wage-earners associations all fell silent. Also, most civic organizations, including the welfare lobby, the Labor Federation, and the universities did not speak up, nor did any of the top business leaders that Mr. Rolnik approached for an interview.

A notable exception was Yossie Hollander, one of Israel’s top high-tech pioneers. Mr. Hollander, who sold his firm The New Dimension for $650 million, is a major philanthropist involved in public policy issues. He told Mr. Rolnik, “We are now in the midst of a most important financial reform and I hear no businessmen speaking [against the bankers attempt to foil a vital reform]. I fear this is no accident, that they are held back by the banks. Israel has very vocal social welfare organizations … why are they keeping quiet? Is it because they all receive support from the banks and therefore fear them?

“… why is our TV ignoring the subject? The bankers have hired most of Israel’s p.r. firms and lobbyists, and they brainwash the public … yet the media keeps silent …

“The immense power of the banks has become a totalitarian threat, people are afraid to speak up when so much power is concentrated in the hands of two banks. In a democracy people should express themselves and not keep their mouths shut,” he concluded.

If Mr. Netanyahu is to win the battle with the powerful bankers, it will be in part because of the support he received from free-market think tanks, and surprisingly, from students and their organizations. Usually, student organizations, especially in Israel, are left wing and push for a welfare state. But prolonged educational efforts have enlightened many of them so that they have become vigorous supporters of free markets and of Mr. Netanyahu’s reforms. They have come to understand that their future as individuals, and Israel’s future as a state, is dependent on a vigorous economy, and in this understanding, as much as in the reform, lies a great hope for Israel.

Mr. Doron is director of the Israel Center for Social and Economic Progress (www.icsep.org.il).