Business News: Why Mannheim Steamroller Rules Christmas

Dec. 11 (Bloomberg) -- The trustee liquidating Bernard L. Madoff’s investment firm, facing a deadline today for filing so- called clawback lawsuits to help victims of Madoff’s fraud, sued Bank Medici AG and its founder, Sonja Kohn, for $58.8 billion.

Irving Picard, the trustee, has filed hundreds of suits in the past month, seeking more than $34 billion from banks, feeder funds, investors and others alleged to have profited from Madoff’s decades-long Ponzi scheme, the biggest in history. So far, Picard has recovered about $2.5 billion for victims of the fraud.

The lawsuit names Kohn, Bank Medici, Bank Austria, UniCredit SpA and dozens of other parties. It seeks $19.6 billion tripled to $58.8 billion under the Racketeer Influenced and Corrupt Organizations Act. It’s by far the biggest claim filed by Picard, who has sued investors, banks, feeder funds and others seeking money to pay investors with valid claims.

Kohn, 62, whom Picard called Madoff’s “criminal soul mate,” used a relationship with the con man that began in 1985 to help build the Vienna-based bank, feeding more than $9.1 billion of investor money into his company, Picard said yesterday in a complaint in U.S. Bankruptcy Court in New York.

‘Illegal Scheme’

“The illegal scheme enriched Kohn, her family, and scores of other individuals and entities, including the largest banks in Austria and Italy, at the expense of the BLMIS estate and on the backs of Madoff’s victims,” Picard said in the complaint, referring to Bernard L. Madoff Investment Securities LLC.

In the 153-page complaint against Kohn, Picard claims she told investors she was very close to Madoff and could deliver higher returns on investments made through his firm. Instead, Madoff was secretly paying Kohn, who knew Madoff was running a fraud, to funnel money into the Ponzi scheme, Picard said.

According to Picard, Kohn ran her own complex scheme centered on Bank Medici, parts of which overlapped with Madoff’s own fraudulent enterprise, delivering $9.1 billion into the Ponzi scheme. They funneled $4 billion of the total through feeder funds including Primeo Fund, Thema International, Herald Fund Alpha Prime Fund, Senator Fund and Herald (Lux), which placed all of their investors’ money with Madoff, according to Picard.

$536 Million Withdrawn

Shortly before Madoff confessed, in December 2008, Kohn withdrew $536 million from Madoff’s firm, Picard said. She also took steps to hide her connection to him, Picard said.

Bank Medici operated as a branch of Bank Austria, which administered its accounts, according to Picard. In return, Bank Austria, which is named as a defendant, was paid at least $31 million.

Bank Medici renamed itself 2020 Medici AG after Austria’s Financial Markets Authority withdrew the company’s banking license because of insufficient capital in May 2009.

Andreas Theiss, a lawyer for Kohn, didn’t respond to a call to his cell phone or an e-mail seeking comment.

‘Defend Ourselves’

“Our attorneys are reviewing the matter and we will manage this through the normal course legal process,” UniCredit said in an e-mailed statement on behalf of UniCredit, Bank Austria and its fund management unit Pioneer Global Asset Management SpA, which is also a defendant. “We intend to defend ourselves vigorously.”

Former UniCredit Chief Executive Officer Alessandro Profumo, who was ousted from the Italian lender in September, is also named as a defendant in the suit. A spokesman for Profumo declined to comment when contacted by Bloomberg News.

Madoff, 72, who pleaded guilty, is serving a 150-year sentence in federal prison in North Carolina.

At the time of his arrest, Madoff’s account statements reflected 4,900 accounts with $65 billion in nonexistent balances. Investors lost about $20 billion in principal.

HSBC Holdings Plc was sued this month for $9 billion by Picard, who alleged Europe’s biggest lender enabled Madoff’s fraud. Picard previously sued JPMorgan Chase & Co. for $6.4 billion over claims the New York-based bank aided and abetted the fraud.

Picard said in a statement yesterday that he sued Frank Avellino and Michael Bienes, as well as family members, for more than $900 million, seeking money they withdrew from Madoff’s firm. Picard called Avellino and Bienes “among the earliest enablers of Bernard Madoff’s.” The statement said the two were certified public accountants.

Picard announced yesterday that he had settled potential claims against a group of charities and non-profit organizations that profited from their Madoff investments for more than $80 million.

One settlement announced, with Hadassah, the Women’s Zionist Organization of America Inc., will add $45 million for distribution to Madoff victims, Picard said in the statement.

Hadassah’s former finance chief, Sheryl Weinstein, wrote in a book published last year about an affair she had with Madoff.

The case is Picard v. Kohn, 10-5411, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--With assistance from Zoe Schneeweiss in Vienna, Elisa Martinuzzi in Milan and Alessandra Migliaccio in Rome. Editors: Michael Hytha, Charles Carter.

To contact the reporters on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net; Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net

Al-Naimi Says No Need for an Oil Output Increase at OPEC Meeting

Posted: 11 Dec 2010 01:47 AM PST

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By Margot Habiby and Fred Pals

Dec. 11 (Bloomberg) -- Saudi Arabian Oil Minister Ali al- Naimi said there is no need for an oil production increase at a meeting of the Organization of Petroleum Exporting Countries later today.

OPEC, which supplies about 40 percent of the world’s oil, hasn’t changed quotas since late 2008, when it announced the biggest-ever reduction in output as global demand collapsed.

Crude oil rose 3.3 percent last month on the New York Mercantile Exchange and exceeded $90 a barrel on Dec. 7 for the first time in more than two years.

“You guys really worry too much about prices,” al-Naimi told reporters yesterday afternoon as he arrived in Quito, Ecuador, for the producer group’s meeting. “They go up, they go down. What’s new?”

Oil may reach $100 a barrel next year as demand from Europe and the U.S. picks up, Goldman Sachs Group Inc. analyst Jeffrey Currie said last month. Global oil supply reached 88.1 million barrels a day last month, its highest ever level, and world demand is forecast to expand 1.5 percent next year to 88.8 million barrels a day, which will also be a record, the International Energy Agency said yesterday in a monthly report.

“Demand is up, supply is up,” said al-Naimi, whose country is OPEC’s biggest producer. Asked if $100 a barrel for oil would be acceptable to producers and consumers, he said, “What else do you have?”

Angolan Oil Minister Jose Maria Botelho de Vasconcelos said earlier in the day yesterday that there’s no reason for OPEC to change production. The 11 members with quotas pumped 26.7 million barrels a day last month, exceeding the official ceiling by 1.86 million barrels a day, or 7.5 percent, according to a Bloomberg survey of producers and analysts.

Weak Dollar

“The situation is stable right now,” and oil at $90 makes up for a weak dollar, the Angolan minister said.

Crude oil for January delivery declined 58 cents to $87.79 a barrel yesterday on the New York Mercantile Exchange, the lowest settlement since Dec. 1. Futures dropped 1.6 percent this week and are up 24 percent from a year ago.

The Dollar Index, which tracks the currency against those of six major U.S. trading partners, dropped more than 9 percent since early June. The Energy Department in Washington forecasts OPEC’s net oil export revenue will be $750 billion this year.

The 12 members of OPEC are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq is exempt from the quota system.

Today’s OPEC meeting is scheduled to start with an opening address by the group’s president, Ecuadorean oil minister Wilson Pastor, at 9 a.m. local time, 2 p.m. London time, followed by a closed-door session two hours later. A press conference is scheduled for about 4:30 p.m. local time.

--With assistance from Juan Pablo Spinetto, Ayesha Daya and Nathan Gill in Quito. Editors: Stephen Voss, Marthe Fourcade

To contact the reporters on this story: Margot Habiby in Quito at mhabiby@bloomberg.net; Fred Pals in Quito at fpals@bloomberg.net

To contact the editors responsible for this story: Stephen Voss at sev@bloomberg.net; Dan Stets at dstets@bloomberg.net

U.S. 10-Year Yield Rises Most in 16 Months on Tax Cut Extension

Posted: 10 Dec 2010 10:40 PM PST

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By Cordell Eddings and Susanne Walker

Dec. 11 (Bloomberg) -- Treasuries plummeted, pushing the yield on the benchmark 10-year note up the most since August 2009, as traders speculated President Barack Obama’s agreement to extend tax cuts will accelerate economic growth.

The yield rose to a six-month high as reports this week showed consumer confidence climbed and a boost in exports shrank the trade deficit more than economists forecast. Central bank policy makers prepared to meet on Dec. 14 after Federal Reserve Chairman Ben S. Bernanke said purchases of government debt may be increased beyond the $600 billion announced last month.

“The sell-off was sparked by the tax policy shift that has raised growth expectation for the economy and raised the amount of money that will need to be raised over the next decade, both of which are negatives for Treasuries,” said Eric Lascelles, chief rates strategist and economist at Toronto-Dominion Bank’s TD Securities unit in Toronto.

The yield on the 10-year note climbed 31 basis points, or 0.31 percentage point, according to BGCantor Market Data. The price of the 2.625 percent security maturing in November 2020 dropped 2 15/32, or $24.69 per $1,000 face amount, to 94 1/4.

The yield rose yesterday to 3.33 percent, the highest level since June 4. The increase was the biggest since it gained 37 basis points during the five days ended Aug. 7, 2009, when the Labor Department’s payrolls report showed lower-than-forecast job losses.

Hedge-fund managers and other large speculators reversed from a net-short position to a net-long position in 30-year bond futures in the week ending Dec. 7, according to U.S. Commodity Futures Trading Commission figures released yesterday.

Long Positions

Speculative long positions, or bets prices will rise, outnumbered short positions by 19,508 contracts on the Chicago Board of Trade. Last week, traders were net-short 12,071 contracts.

Bonds fell this week after Obama agreed on Dec. 6 to a two- year extension of current tax rates in exchange for another 13 months of federal unemployment insurance for the long-term jobless and cutting the payroll tax by $120 billion for a year.

Pacific Investment Management Co., which manages the world’s biggest bond fund, raised its forecast for U.S. growth next year as policy makers pump a “massive amount” of stimulus into the economy, Chief Executive Officer Mohamed El-Erian said in a telephone interview on Dec. 9.

Pimco expects the economy to grow 3 percent to 3.5 percent in the fourth quarter of next year from the same period of this year. That compares with its previous estimate for 2 percent to 2.5 percent growth, and the 2.2 percent gain forecast for this year by the International Monetary Fund.

Thirty-Year Bond

The 30-year bond yield rose 12 basis points to 4.43 percent after touching 4.50 percent on Dec. 8, the highest level since May 13. The yield on the two-year note advanced 17 basis points to 0.64 percent in the biggest weekly increase since Jan 1.

“This is a Treasury market that is better able to trade based on economic reports going forward,” said William O’Donnell, head U.S. government bond strategist in Stamford, Connecticut, at Royal Bank of Scotland Plc’s RBS Securities Inc., a primary dealer. He spoke yesterday in a Bloomberg Radio interview with Kathleen Hays on the “Hays Advantage.”

The central bank is preparing to meet after announcing last month a second round of debt buying through June under the policy known as quantitative easing. The Fed expects to reinvest $250 billion to $300 billion of proceeds from mortgage-backed debt and agency securities into Treasuries during that time.

The Fed will purchase about $105 billion of Treasuries during the next month, the New York Fed said in a schedule posted yesterday on its website.

Bernanke’s View

Buying more U.S. government bonds than already announced is “certainly possible,” Bernanke said in an interview broadcast Dec. 5 on CBS Corp.’s “60 Minutes” program. “It depends on the efficacy of the program” and the outlook for inflation and the economy, Bernanke said.

The trade deficit narrowed 13 percent to $38.7 billion, less than the lowest estimate of 78 economists surveyed by Bloomberg News and the smallest since January, Commerce Department figures showed yesterday in Washington. Exports were the strongest since August 2008 as Mexico and China bought record amounts of U.S. products.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment increased to 74.2 in December from 71.6 in the previous month. The median forecast of 67 economists in a Bloomberg News survey was for an advance to 72.5.

A 30-year bond yield near a seven-month high buoyed the $13 billion auction of the debt on Dec. 9. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of debt offered, was 2.74, the highest since the Aug. 12 sale. The $32 billion 3-year note auction on Dec. 7 attracted the lowest bid-to-cover ratio since February. The Treasury sold $21 billion of 10-year notes on the following day at a yield of 3.34 percent, the highest in seven months.

There won’t be another round of note offerings until the Treasury sells 2-, 5-and 7-year debt starting Dec. 27.

--Editors: Dennis Fitzgerald, Dave Liedtka

To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Susanne Walker in New York at swalker33@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

Dollar Rallies After U.S. Tax-Cut Agreement, Higher U.S. Yields

Posted: 10 Dec 2010 10:34 PM PST

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By Catarina Saraiva

Dec. 11 (Bloomberg) -- The dollar rose the most since September against the euro after an agreement to extend and expand tax cuts fueled speculation the U.S. economy will accelerate, driving stocks and Treasury yields higher and boosting demand for greenback-denominated assets.

The U.S. currency strengthened against most of its major counterparts this week as reports showed claims for jobless benefits decreased, exports swelled to a two-year high and consumer sentiment climbed. The euro fell against the greenback after Ireland’s credit rating was downgraded and the region’s political leaders differed about how to contain the debt crisis. The Federal Reserve holds a policy meeting next week as it continues to buy Treasuries to bolster the economy.

“A lot of the positive news we’ve seen out of the U.S. has helped the dollar strengthen,” said Mary Nicola, a strategist at BNP Paribas SA in New York. “We’ve seen the 10-year yields push up. It looks like it’s helping push the dollar up.”

The dollar rose 1.4 percent to $1.3226 per euro, from $1.3414 Dec. 3. It touched $1.3165 per euro Dec. 9, the strongest since Dec. 2. The U.S. currency added 1.7 percent to 83.95 yen, from 82.53 last week. The euro added 0.3 percent to 111.04 yen from 110.73.

Index Gains

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, gained 0.9 percent to 80.107. It rose every day this week, the longest winning streak since the five-day period ended Nov. 11.

The Standard & Poor’s 500 index gained 1.3 percent this week.

The dollar has declined 1.1 percent this year in a measure of the currencies of 10 developed nations, according to Bloomberg Correlation-Weighted Currency Indexes. The euro has dropped 9.5 percent. The yen is up 10.8 percent.

The dollar rallied after President Barack Obama on Dec. 6 broke a stalemate about extending middle-class tax cuts introduced by the administration of George W. Bush. Obama said he would accept lower tax rates on high earners’ income, dividends, capital gains and multimillion dollar estates for the next two years in exchange for extending federal unemployment insurance and a one-year cut in payroll taxes.

Yields on 10-year Treasuries reached 3.33 percent yesterday, the highest since June 4.

Euro Issues

The euro has dropped 6.9 percent since Nov. 4 when the European Central Bank President signaled plans to end emergency stimulus. The common currency declined this week as Fitch Ratings downgraded Ireland and after German Chancellor Angela Merkel and French President Nicolas Sarkozy, in talks yesterday, said they oppose increasing the European Union’s 440 billion- euro ($581 billion) rescue fund and rejected joint euro-area bonds.

“The euro zone has a lot to do structurally to be able to right the ship,” said Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York. “It will continue to keep the euro somewhat on the defensive.”

Fitch cut Ireland’s credit rating to BBB+ from A+, three steps above non-investment grade, citing the mounting cost to rescue the nation’s banking system.

‘Structural Weaknesses’

Merkel said that there are “structural weaknesses” in the euro region that must be addressed. Merkel held talks with Sarkozy in Freiburg, Germany, before a Dec. 16-17 European Union summit. The leaders of the euro-area’s two largest economies said the continued existence of the common currency is “non- negotiable.”

“If the euro fails, Europe fails,” Merkel said.

Europe’s sovereign debt crisis took hold at the end of 2009 after a new government in Greece said the budget deficit was twice as big as the previous administration disclosed. The region’s nations assembled a rescue fund in May, which Greece and Ireland have tapped.

Reports showed improvements in the U.S. economy after a Dec. 3 report showed an unexpected jump in the unemployment rate to 9.8 percent.

The U.S. trade deficit narrowed 13 percent to $38.7 billion, less than the lowest estimate of 78 economists surveyed by Bloomberg News and the smallest since January, Commerce Department figures showed yesterday.

Economic Output

“That’s very good news for the U.S. economy and for the dollar, if it’s sustained,” said Greg Anderson, a currency strategist at Citigroup Inc. in New York. “If U.S. yields hold where they’ve moved to this week, then the dollar ought to rally.”

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose in December to 74.2, the highest since June, from 71.6 at the end of last month.

The Australian dollar fell this week on concern Chinese inflation data tomorrow will back the case for the China to tighten monetary policy. Australia’s currency dropped 0.8 percent to 98.53 U.S. cents, from 99.31 cents Dec. 3.

The People’s Bank of China increased reserve requirements by 50 basis points starting Dec. 20, the central bank said on its website today. It’s the third increase in five weeks.

“The danger is China raises interest rates steeply, causing a hard landing for the Chinese economy, which would obviously hurt Australia’s exports,” said Derek Mumford, a Sydney-based director at Richford Capital, a foreign-exchange and rates risk management firm.

Fed policy makers will leave the benchmark interest rate unchanged at a range of zero to 0.25 percent, according to all 84 estimates in a Bloomberg survey. The central bank will meet Dec. 14.

The Fed yesterday announced plans to buy $105 billion of Treasuries in 18 rounds starting Dec. 13 and ending Jan. 11. The central bank said following its Nov. 2-3 policy meeting it would buy an additional $600 billion in U.S. government debt through June to sustain the economic recovery and prevent deflation.

--Editors: Paul Cox, Dave Liedtka

To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net;

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

UN Climate Talks Close in on Pact to Create $100 Billion Fund

Posted: 10 Dec 2010 10:20 PM PST

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By Alex Morales and Jim Efstathiou Jr.

Dec. 11 (Bloomberg) -- Envoys at United Nations global warming talks are closing in on an agreement to protect forests, stimulate aid to developing nations and establish a body to advise countries on adapting to higher temperatures.

The proposed package, which must win the backing of delegates from 193 nations before the meeting ends in Cancun, Mexico, requires richer countries and poorer ones to set aside differences about how to limit greenhouse gas emissions.

“Brazil fully supports the document,” said Izabella Teixeira, the environment minister of Brazil, which was tapped by the UN to help find a compromise. “Let’s adopt it.”

A UN document suggesting conclusions pushed until next year debate on how to reduce fossil fuel emissions once the current restrictions in the Kyoto Protocol expire in 2012. While Bolivia said it objected to “many” parts of the text, observers at the talks said the compromises outlined may well stick.

“They seem to have solved the Kyoto conundrum,” said Tim Gore, policy adviser for Oxfam. “They seem to have a system which will give enough confidence to developing countries that the Kyoto Protocol will move ahead.”

Bolivia, which along with six other countries blocked last year’s accord in Copenhagen, said it wanted delegates to negotiate on its demands for an international court to police emissions cuts and about the rights of indigenous peoples.

“We won’t be blackmailed,” Pablo Solon, Bolivia’s envoy at the talks, said at a briefing. “We won’t give up to ‘take it or take it’ conditions.”

Elements of Plan

The deals suggested in a draft UN text include:

-- A “Green Climate Fund” that would manage a “significant share” of the $100 billion pledged last year in climate aid from richer to poorer nations. The World Bank was invited to manage the fund.

-- A technology mechanism would be set up to help developing nations tap low-carbon products such as wind turbines, solar panels, and energy-saving devices. Further market mechanisms will be debated at next year’s conference in Durban, South Africa.

-- A forest protection program known as Reducing Emissions from Deforestation and Forest Degradation, or REDD. It would fund forestry projects for developing nations. A mention of the programs tapping carbon markets was dropped from the UN draft text.

Adaptation Program

-- A “Cancun Adaptation Framework” which would help assess the needs of the most vulnerable nations to adapt to the effects of higher temperatures such as rising sea levels, increased droughts and melting glaciers.

-- A package of details on how to monitor, report and verify emissions reductions by developed countries and climate protection actions taken by poorer ones, or MRV in UN jargon.

“These drafts represent real and very substantive progress,” Patricia Espinosa, the Mexican foreign secretary who is leading the talks, told delegates who gave her a standing ovation for her efforts. “Every view has been taken into account. Each of you will have to live with the consequences of our choices and of our actions.”

The text did not outline tighter emission targets from any nation, referring instead to figures that will be published later covering cuts from industrial and developing nations.

Kyoto Outlook

The lack of an extension or a replacement for the 1997 Kyoto Protocol may boost the cost of fighting climate change, said David Hone, chairman of the International Emissions Trading Association, a Geneva-based lobby group,

“If there is no international cohesiveness, it makes it more difficult for a responsive market-based approach to develop,” said Hone, also Royal Dutch Shell Plc’s climate adviser. “This ultimately leads to a higher-cost solution for everyone,” he said in a phone interview from London.

The dispute about how to replace or extend Kyoto marred the two weeks of talks and nearly derailed them. China, India, Brazil and South Africa pressed industrial nations to agree to new restrictions on fossil fuel emissions once Kyoto finishes. Japan, Canada and Russia refused, saying the accord excludes the world’s two biggest polluters, the U.S. and China.

“The negotiations are not completely fulfilled,” China’s delegation chief Xie Zhenhua told delegates at the conference. “The negotiations in the future will continue to be difficult.”

Compromise Wording

Compromise wording keeps alive the possibility that Kyoto is extended while not committing any nation to make new promises. The UN document said countries will move as soon as possible to ensure there is no gap between the Kyoto treaty’s first commitment period expiring in 2012 and the next round of cuts. It suggests “further work” will need to be done.

“This is a good paper, and a good basis for moving forward,” Kuni Shimada, the Japanese envoy, said in an interview, praising the work of the Mexican foreign minister. “She could have closed the meeting with it and that would be the happy ending. She deserved her standing ovation.”

The UN text suggests the world keep temperature gains below 2 degrees Celsius (3.6 degrees Fahrenheit) and consider whether to make the pledge 1.5 degrees. Current emissions reduction pledges could lead temperatures to rise up to 5 degrees by 2100, the UN Environment Program said Nov. 23.

“I’m really disappointed, because we’re toying around the edges,” Bharrat Jagdeo, president of Guyana, said in an interview Dec. 9. “Positions are watered down. The greenhouse gases are being pumped into the atmosphere.”

Bolivian Objection

Last year, Bolivia joined Venezuela, Sudan, Cuba, Nicaragua and Tuvalu in blocking the Copenhagen Accord, an agreement brokered by about 30 leaders, including U.S. President Barack Obama and China’s Premier Wen Jiabao, from being adopted as a formal UN text.

“There’s more work to do, but we’re willing to accept a compromise,” Quamrul Chowdhury, a Bangladeshi envoy, said in an interview.

A draft text covering possible extension of the Kyoto treaty notes that developed countries would need to cut combined emissions in the range of 25 percent to 40 percent below 1990 levels by 2020. Targets for the first commitment period, from 2008 through 2012, seek to cut developed country emissions by 5.2 percent from 1990 levels.

--With additional assistance from Carlos Manuel Rodriguez, Mathew Carr and Kim Chipman in Cancun. Editors: Reed Landberg, Paul Tighe

To contact the reporters on this story: Alex Morales in Cancun, Mexico, at amorales2@bloomberg.net; Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

Former President Clinton Takes Stage to Push For Obama Agenda

Posted: 10 Dec 2010 09:38 PM PST

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By Nicholas Johnston and Kate Andersen Brower

Dec. 11 (Bloomberg) -- Former President Bill Clinton sought to use his clout with Democratic lawmakers to get President Barack Obama’s tax deal with Republicans passed over the objections of lawmakers in his own party.

“This is a good bill,” Clinton said yesterday about the compromise agreement Obama reached with congressional Republicans to extend tax cuts and unemployment benefits beyond this year.

Standing alongside Obama after the two men met private in the Oval Office yesterday, Clinton called the deal a “significant net plus.” Still, he said he understands the resistance from congressional Democrats to keeping Bush-era tax cuts for the wealthiest Americans and to an estate-tax provision that would set the top rate at 35 percent after a $5 million tax-free allowance per individual.

Clinton stood at the podium of the White House briefing room during an unscheduled question-and-answer-session with reporters, making clear he was enjoying the experience. After Obama left about 10 minutes into the session, Clinton stayed on for 20 more.

Asked whether he was happier being in the White House giving advice rather than governing, Clinton drew laughter with his reply.

“Oh, I had quite a good time governing,” he said. “I’m happy to be here, I suppose, when the bullets that are fired are unlikely to hit me.”

Taxes and Treaty

Clinton said the benefits of the 13-month extension of unemployment aid for the long-term jobless and the one-year cut in payroll taxes and tax breaks for small businesses have been overlooked in Obama’s plan. He also voiced his support for the ratification of a new arms control treaty with Russia by the end of the year. The office of Republican Senator Richard Lugar of Indiana, key to approval of the START agreement by his party, says the Senate will have enough votes to ratify the treaty.

“I think this START agreement is very important to the future of our national security,” Clinton said. “This is something that is profoundly important, this ought to be way beyond party.”

Obama, 49, invited Clinton, 64, to the White House several weeks ago, White House press secretary Robert Gibbs told reporters earlier yesterday. The meeting was Obama’s first with Clinton since last month’s congressional elections when Democrats lost control of the House of Representatives and saw their majority narrowed in the Senate. Clinton faced a similar setback in the 1994 mid-term elections and went on to win a second term as president.

Spokesman for Deal

Obama called the meeting with the former president “terrific.” He introduced Clinton by saying that he is a good spokesman for the deal and j“given the fact that he presided over as good an economy as we’ve seen in our lifetimes that it might be useful for him to share some of his thoughts.”

Relations between Obama and Clinton have warmed since the end of the 2008 Democratic presidential primary campaign, in which Obama’s chief rival for the party’s nomination was Clinton’s wife, Secretary of State Hillary Clinton.

Clinton was a prominent campaigner for his wife, and was publicly rebuked by Obama for once accusing Obama’s campaign of playing “the race card on me.”

Following the election, Hillary Clinton joined the Obama administration as chief diplomat and has sought Bill Clinton’s help on issues from North Korea to earthquake relief in Haiti.

The former president was also one of the top campaigners for Democratic congressional candidates during last month’s mid- term elections, though Democrats lost seats in the Senate and their House majority.

‘Relief for America’

“Given all of the alternatives that I have imagined actually becoming law this is the best economic result for America,” Clinton said. “I think it is an enormous relief for America to think that both parties might vote for something, anything, that they could both agree on.”

House Democrats held a nonbinding vote Thursday to prevent the tax compromise from being voted on in the House of Representatives unless changes are made.

The Senate will take up the estimated $857 billion proposal next week.

Like Obama, Clinton said he opposes an extension of tax cuts for wealthy Americans because that would “not be the most efficient way to get the economy going again,” though their inclusion is needed to gain the support of Senate Republicans.

Gibbs said Clinton “was as robust in his support for candidate Obama after he was the nominee, as robust a supporter as anybody you could name.”

Clinton’s efforts in the 2010 midterm elections on behalf of Democratic candidates is “right behind” campaigning by Vice President Joe Biden “in terms of the amount of places that he went and the number of things that he did,” Gibbs said.

Clinton called compromise an “ethical thing to do,” though he said there are certain things that are worth fighting for, including fighting against the repeal of the health-care overhaul and the repeal of new financial rules.

In a final push for the tax deal, Clinton said in a divided government “people no longer see principled compromise as weakness.”

He said, “this system was set up to promote principled compromise.”

--Editors: Joe Sobczyk, Mark Silva

To contact the reporters on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net; Kate Andersen Brower in Washington at kandersen7@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

Clinton Toughens Language on Middle East, Wants ‘Real Progress’

Posted: 10 Dec 2010 09:31 PM PST

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By Nicole Gaouette and Flavia Krause-Jackson

Dec. 11 (Bloomberg) -- U.S. Secretary of State Hillary Clinton told Israelis and Palestinians to stop “demonizing” each other and to make “real progress” on their disagreements in the next few months.

Addressing senior Israeli and Palestinian officials, Clinton expressed “deep frustration” that negotiations haven’t gone further and faster. Both sides should stop assigning “blame for the next failure,” she said.

“It is time to grapple with the core issues of this conflict on borders and security, settlements, water and refugees, and on Jerusalem itself,” Clinton said in a speech in Washington late yesterday. Both sides “have often not been ready to take the necessary steps. Going forward, they must take responsibility and make the difficult decisions that peace requires.”

As Israelis and Palestinians enter a new phase of talks after direction negotiations broke down in September, Clinton said the U.S. would offer proposals to bridge differences between the two groups “when appropriate.” The top U.S. diplomat stressed it was in the interests of the U.S. to see a resolution to a conflict she described as a “source of tension” in the region.

Clinton spoke at a conference organized by the Brookings Institute’s Saban Center for Middle East Policy. The audience included Israeli Defense Minister Ehud Barak and Palestinian Authority Prime Minister Salam Fayyad.

Stern Language

Clinton adopted stern language in her first public remarks on the Middle East peace process since the administration decided four days ago to stop pressuring Israel to renew a moratorium on West Bank settlement construction.

“Palestinians must appreciate Israel’s legitimate security concerns,” Clinton said. “And Israelis must accept the legitimate territorial aspirations of the Palestinian people. Ignoring the other side’s needs is in the end self-defeating.”

She also rebuked Palestinians for seeking recognition of their state from the United Nations. Brazil and Argentina announced this month that they would recognize a Palestinian state with pre-1967 borders, and Uruguay pledged to do the same next year. “Unilateral efforts,” Clinton said, are “not helpful and undermine trust.”

Israelis were receptive to her message that time was running out to reach an agreement.

“The world is changing before our eyes and is no longer willing to accept our continued control over another people,” Barak said in a speech that came after Clinton’s. As for an agreement, Barak said “in the coming weeks we will find a way to make it happen.”

In bringing the two sides together in September, President Barack Obama and Clinton said they aimed for a peace settlement within a year. Clinton’s speech made no reference to that goal.

‘Days Ahead’

To underline the administration’s sense of urgency, Clinton said U.S. discussions in the days ahead with both sides “will be substantive, two-way conversations.”

She is sending U.S. envoy George Mitchell back to the region on Dec. 12.

Clinton said she had already begun to work on core issues in meetings yesterday with Palestinian and Israeli officials, including Fayyad and Barak and also consulted Palestinian negotiator Saeb Erakat and chief Israeli negotiator Yitzhak Molho.

Clinton said the two sides must agree on a “single line drawn on a map that divides Israel from Palestine” and to permanent Palestinian borders with Israel, Jordan and Egypt.

Palestinian Refugees

She was less definitive on the issue of Palestinian refugees who want to return to homes they left in what is now Israel. The “difficult and emotional” issue needs a “just and permanent solution that meets the needs of both sides,” Clinton said.

Clinton said Israel settlements are “corrosive, not only to peace efforts and the two-state solution, but to Israel’s future itself.” The U.S. doesn’t accept the legitimacy of continued settlement activity, Clinton said.

On Jerusalem, which Jews and Arabs claim as a capital, Clinton urged the two sides to agree on an outcome that “safeguards its status for people around the world.”

Direct talks between Israeli Prime Minister Benjamin Netanyahu and the Palestinian Authority President Mahmoud Abbas collapsed in September after less than a month when a 10-month Israeli moratorium on settlement construction expired.

After weeks of diplomacy aimed at persuading Israel to renew a freeze on settlement-building, the U.S. retracted its offer to give Israel 20 additional F-35 fighter jets in return for a 90-day moratorium on construction in the West Bank.

--Editors: Paul Tighe, Jim McDonald

To contact the reporters on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net; Flavia Krause-Jackson in Washington at fjackson@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.

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