Argentina to court: revert order on debt holdouts

BUENOS AIRES, Argentina (AP) — Argentina is asking a US appeals court to reverse an order for the country to pay $1.33 billion to "holdout" creditors who refused to join two swaps for the country's defaulted debt.
Argentine government lawyers said in papers filed late Friday that the order violates the country's sovereignty. The lawyers said the order also threatens service on at least $24 billion of the county's restructured sovereign debt, impairs the rights of third parties and puts global debt markets at risk.
"The Amended Injunctions have no basis in law, are inequitable, and threaten to wreak havoc on countless innocent third parties, which have already suffered losses due to the plunge in their bonds' value provoked by the insecurity that the Amended Injunctions have created in the market for Argentina's New York law-governed bonds," the briefing said.
"This harm to private and sovereign creditors, as well as to New York law and New York as a place to do business, will only grow if the Amended Injunctions are affirmed. "
The U.S. 2nd Circuit Court of Appeals in New York ordered the country on Oct. 26 to pay the holdouts an equal amount whenever it makes payments on other debt that has been restructured since the country's economic collapse 11 years ago.
It agreed with U.S. District Judge Thomas Griesa, who ruled that with more than $40 billion in foreign reserves, Argentina can afford to pay. The ruling gave Argentina a difficult choice: pay all bondholders equally, or pay none of them and risk going into default.
The court then returned the case to Griesa who ordered Argentina to pay the $1.33 billion into escrow for holders of its defaulted debt and banned banks and other third parties from intervening. Griesa based his ruling on the principle of "pari passu," or equal footing, which says debtors can't pick and choose between creditors.
President Cristina Fernandez called Griesa's ruling "judicial colonialism," and Argentina sidestepped the impending economic chaos when the order was suspended by the appeals court on Nov. 28.
But just the threat of the payment deadline set by Griesa had harsh outcomes. In the week after he issued his order, the cost of maintaining Argentina's overall debt soared in trading on U.S. and European bond markets and the cost of insuring those debts spiked.
"A court can arguably enjoin a foreign state from engaging in a commercial activity within the United States. But it cannot issue an order to force or preclude a foreign sovereign to act or not act within the limits of that sovereign's own territory," Argentina's brief said.
"By dictating to Argentina that it cannot pay moneys it owes to the exchange bondholders in a funds transfer in its own country, and commanding that it make a payment (including via escrow) to holdout creditors that it is precluded from paying under its own laws, the Amended Injunctions violate this fundamental principle."
Argentina, however, said it's willing to make concessions. To end the lengthy dispute, government lawyers said the country is willing to ask Congress to give holdout creditors the same treatment as those who joined a 2010 debt swap.
"The only definitive and equitable solution to pari passu claims that would bring legal and economic certainty is to treat plaintiffs and all other similarly situated claimants equitably on the same terms as participants in (Argentina's) 2010 Exchange Offer," the brief said.
The new arguments are part of the final stage of Argentina's legal battle with NML Capital Ltd., the investment fund that brought the case and that specializes in suing over unpaid sovereign debts.
The US government filed an "amicus," or friends of the court brief, late Friday backing Argentina's request for a rehearing in the case citing that the appeals court order affects US-Argentina relations, threatens the solution of future debt crises and blocks the legal immunity given to a sovereign country. It also says that it potentially blemishes the role of New York as financial center.
Argentina tarnished its reputation worldwide by engaging in the biggest sovereign debt default in history a decade ago. Since then, the government has restructured about 92 percent of its world record $95 billion debt default.
But Fernandez refuses to pay the holdouts calling NML Capital and others "vulture funds" for buying debt for pennies on the dollar in 2002, when Argentina's economy was in ruins and now wanting to collect in full.
The fiery, center-left leader says it was their loss for refusing two opportunities to swap defaulted bonds for new, less valuable bonds that the state has reliably paid since 2005.
NML Capital fund, run by billionaire Paul Singer and other plaintiffs, slammed Argentina's arguments late on Friday.
"With more than $43 billion in foreign currency reserves and tens of billions of dollars in additional resources, Argentina has the overwhelming capacity to pay the $1.3 billion it owes in this matter," Peter Truell, spokesman for NML's parent company Elliott Management Corp., told the Associated Press in e-mail.
"Today's filing by the Republic once again demonstrates Argentina's irrational persistence in evading its contractual obligations and the orders of US courts."
Oral arguments in the case are scheduled for Feb. 27 before the U.S. 2nd Circuit Court of Appeals in New York.

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Venezuela VP in Cuba to visit ailing Chavez

HAVANA (AP) — Venezuela's vice president arrived in Havana on Saturday in a sudden and unexpected trip to visit President Hugo Chavez as he recovers from cancer surgery.
Communist Party newspaper Granma published online a photo of a smiling Vice President Nicolas Maduro being greeted at the airport in the Cuban capital by the island's foreign minister, Bruno Rodriguez.
"From there, (Maduro) went directly to the hospital where President Hugo Chavez Frias is receiving treatment to greet his family members and Venezuelan Science and Technology Minister Jorge Arreaza Monserrat, and to discuss with doctors the adequate moment to visit the President the same day," the paper said.
Granma added that Maduro was accompanied by Venezuelan Attorney General Cilia Flores.
The previous night in Caracas, Venezuela, Maduro did not specify how long he would be away but said Energy Minister Hector Navarro would be in charge of government affairs in the meantime. Maduro's announcement came at the end of a long speech at the inauguration of a state governor, and he offered no information on the purpose of his visit beyond seeing Chavez.
In a speech Saturday, Venezuela's National Assembly President Diosdado Cabello said only that Maduro went to Cuba to visit with Chavez and urge him "to follow his treatment." Venezuelan press officials in Caracas said they had no additional information Saturday.
Maduro's trip comes amid growing uncertainty about Chavez's health.
The Venezuelan leader has not been seen or heard from since undergoing his fourth cancer-related surgery Dec. 11, and government officials have said he might not return in time for his scheduled Jan. 10 inauguration for a new six-year term. There have been no updates on Chavez's condition since Maduro announced Monday night that he had received a phone call from the president who was up and walking.
Venezuela's opposition criticized Maduro for what they said was a lack of transparency surrounding Chavez's health.
"What I still don't understand is who is president," Lawmaker Alfonso Marquina said. "Who is governing the country now? As for the purpose of this sudden and improvised trip, only the national government knows."
Maduro is the highest ranking Venezuelan official to visit Chavez since the surgery. Bolivian President Evo Morales traveled to Cuba last weekend in a quick trip that only added to the uncertainty surrounding Chavez's condition. Morales has not commented publicly on his visit or even confirmed that he saw Chavez while he was there.
Before leaving for Cuba, Chavez acknowledged the precariousness of his situation and designated Maduro as his successor, telling supporters they should vote for the vice president if a new presidential election was necessary. Although Chavez has delegated some administrative powers to Maduro, he did not leave the vice president officially in charge of the presidency.
Venezuela's Democratic Unity bloc of opposition parties suggested Saturday it was time for the government to declare the president temporarily absent from power.
"They are trying to hide what every day is a fact: The government does not want to recognize that there is a temporary absence of the president from his duties," the bloc said in a statement.
On Friday morning, Maduro read a New Year message from Chavez to Venezuelan troops, though it was unclear when the president composed it.
"I have had to battle again for my health," Chavez said in the message. He expressed "complete faith in the commitment and loyalty that the revolutionary armed forces are showing me in this very complicated and difficult moment."
A group of opposition candidates demanded Friday that Maduro provide an official medical report on Chavez's health. Lawmaker Dinorah Figuera said the country needs "a medical report from those who are responsible for the diagnosis, evaluation and treatment of the president."
"The Venezuelan people deserve official and institutional information," Figuera told Venezuelan media.
A legal fight is brewing over what should happen if Chavez, who was re-elected in October, cannot return in time for the inauguration before the National Assembly.
National Assembly Diosdado Cabello insisted Monday that Venezuela's constitution allows the president to take the oath before the Supreme Court at any time if he cannot do it before the legislature on Jan. 10.
Opposition leaders argue the constitution requires that new elections be held within 30 days if Chavez cannot take office Jan. 10. They have criticized the confusion over the inauguration as the latest example of the Chavez government's disdain for democratic rule of law and have demanded clarity on whether the president is fit to govern.

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AP's Honduras correspondent navigates violent land

TEGUCIGALPA, Honduras (AP) — Every Saturday morning, one of my taxi drivers pays about $12 for the right to park his cab near a hospital, about two blocks from a police station.
But it's not the government that's charging.
An unidentified man pulls up in a large SUV, usually brandishing an AK-47, and accepts an envelope of cash without saying a word. Jose and nine other drivers who pay the extortionists estimate that it amounts to more than $500 a year to park on public property. During Christmas, the cabbies dish out another $500 each in holiday "bonuses."
Meanwhile, Jose pays the city $30 a year for his taxi license.
"Who do you think is really in charge here?" Jose asked me.
It is an interesting question, one I have been trying to answer since I arrived here a year ago as a correspondent for The Associated Press. Is the government in charge? The drug traffickers? The gangs? This curious capital of 1.3 million people is a lawless place, but it does seem to have its own set of unwritten rules for living with the daily dangers.
Jose, who did not want his last name used for fear of reprisals, says his extortionists are from "18th Street," a powerful gang that started in U.S. prisons. The taxi drivers don't bother to report the crime, he says, because they suspect police are involved in the racket. In the first six months of 2012, 51 taxi drivers were killed in Tegucigalpa — most of them, Jose's colleagues believe, for failing to pay extortionists.
When I moved to Tegucigalpa last March several friends back home in Spain wanted to know why. The big story was in Egypt, Libya and Syria; what was I planning to do on the other side of the globe? "Bear witness," I said, "to the most violent place in the world, to a country in crisis."
I am the only foreign correspondent here, with no press pack to consult on questions of security, or to rely on for safety in numbers. I fall back on instincts honed in war zones, but they are not always sufficient when you are covering a failing state.
When you are in the trenches of Libya, you generally know where the shooting comes from. But in Honduras, you never know where danger lurks.
Three weeks after I arrived, I attended a ceremony in the capital where U.S. Assistant Secretary of State William Brownfield delivered 30 motorcycles to President Porfirio Lobo to help Honduras fight crime. A neighborhood leader, however, had complained to me that the narcos had bribed some police officers to look the other way. I asked the officials if they weren't afraid the motorcycles would end up in the hands of the bad guys.
I got no answer. Instead a Honduran reporter wrapped his arm around my shoulder and whispered, "We don't ask questions like that here." If I wanted to survive in Honduras, he said, "Keep a low profile."
More than two dozen Honduran journalists have been killed in the last two years. Some reporters carry weapons to protect themselves, others use the armed guards that President Lobo offered after a prominent Honduran radio journalist was assassinated last May — reportedly in retaliation for a government crackdown on cartels.
It is not hard to become a fatality. A few months ago, I interviewed a lawyer, Antonio Trejo, who was defending the peasants of Aguan Valley in a land dispute against agribusiness tycoon Miguel Facusse, one of the most powerful men in the country. Trejo had warned repeatedly that he would be killed for helping the campesinos. Two days after I interviewed him, he was shot six times as he was leaving church by two men on a motorcycle.
In August, I took a walk on a Sunday with a couple of friends in a sad dilapidated park — one of only two in the city. I got a call on my iPhone. I stepped away from friends and began to walk as I talked, as you would in a normal city, a normal park. Suddenly two teenagers approached me, asking first for a cigarette, then for the phone. I hung up, put the phone in my pocket and shouted over to my friends, who helped me chase the young men away — once we realized they weren't armed.
But I learned my lesson. Unwritten rule: Do not walk around talking on an iPhone, which costs about three times a monthly salary in Honduras. And forget the park.
Like most Hondurans who can afford it, my family and I live behind high gated walls with a guard out front. After the park episode, I gave up my morning ritual of newspapers and espresso at an outdoor cafe. I don't go out at night.
In the daytime, I use trusted drivers like Jose to guide me through Tegucigalpa's chaotic streets, past its barbed-wire fences, mounds of garbage and packs of dogs. I keep the tinted windows up, the doors locked, and we don't stop at the lights, so we won't get carjacked.
I vary my routes. I try not to fall victim to the permanent sense of danger that hangs over the capital, where the conversation is invariably about whose relative was just killed, or what atrocity happened on the corner. Yet I constantly check the rear and side mirrors of Jose's car for approaching motorcycles. Honduras has the world's highest murder rate, and paid gunmen almost always travel by motorcycle to make a quick getaway through impossible traffic.
The violence is a stark contrast to the friendly feel of a land where many have a Caribbean attitude about life, happy and easygoing. Once you leave the cities, the landscape is amazing — wild, healthy, and savage, from the waterfalls of La Tigra National park, just half an hour from the capital, to the islands of the Caribbean and the world's second largest coral reef.
___
Our babysitter, Wendy, sells Avon products door-to-door to make extra money after her child's father disappeared on his clandestine journey to the U.S. to find work.
Last month, she was on her way to deposit her Avon earnings in the bank when a robber pointed a knife at her waist and told her to hand over the cash. He took 5,000 lempiras — about $250 — which was everything she had earned, including the money she owed Avon.
Again last week, Wendy encountered thieves, this time as she left my house about 7:30 p.m. Half a block away, she passed a group of basketball players just as three gunmen threw them up against a wall, stealing their money and phones. "They looked like police," she said of the gunmen.
Two days later, a neighbor in her poor barrio of ramshackle huts and dirt roads was robbed by an armed drug addict. The neighbor escaped, went home for his own gun and returned to kill the drug addict. "Police thanked him for the favor," Wendy said.
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My best friend here is a man named German who studied art and opened a tattoo parlor with a business partner. They were talented and developed a good clientele, particularly among youths looking to leave the street gangs and get rid of the signature tattoos. German learned how to convert numbers such as 18 into pirate ships, and to turn other gang symbols into random designs. He saw this as a kind of social service, removing a stigma from the skin of a gangster who wanted to return to civilian life, and he asked to borrow a camera of mine to take pictures of their work.
Some days later, German's partner was walking home when a black car drew near. He tried to run until the front-seat passenger screamed at him to halt. "Get in and put this on," the man said, handing him a black hood.
They took him to a dark room where they removed the hood and claimed he spied on them. They tortured him for several hours before letting him go, with a broken rib.
My friend closed his shop and moved to a new house. He knows they are looking for him.
German comes from a family of means. Here, violence is democratic.
___
Honduran officials receive aid from the U.S. to fight the trafficking of cocaine headed for the U.S. market. The country has 640 kilometers (400 miles) of northern Caribbean coastline, with plenty of tree cover and great uninhabited stretches for moving drugs. It is flanked by the port town of Puerto Lempira in the east and San Pedro Sula in the west.
While Hondurans blame their police for much of the crime, police say they are overwhelmed and outgunned by the drug traffickers and criminals. AP photographer Esteban Felix and I decided to see this for ourselves, and rode with police in San Pedro Sula, the country's largest and wealthiest city.
In one night, we saw the bodies of two bus drivers who had been killed for refusing to pay a cut to gangs, a police officer executed on a highway with a single shot to the head, and three people shot dead in a pool hall for what was described as "a settling of accounts."
The hospital emergency room looked like a scene out of a civil war, with mop-wielding orderlies failing to keep up with the blood pooling on the floor.
The owner of the bus company urged his employees to remove the drivers' bodies and collect the fares from the bloodied bus before police did. Once again, I made the mistake of asking a question, this time of the owner of the bus company. He turned in anger and ordered me not to publish what I had seen, while asking me repeatedly, "Where are you staying?"
Needless to say, I did not stay the night in San Pedro Sula.
I returned to the capital, which, despite the violence, has become my home. My two-year-old daughter can say Tegucigalpa — which is not easy. And every time she sees the flag, she waves and says "Honduras," as she was taught in her preschool.
Somehow, we already belong to this country. After 10 months living here, I have learned the rules of survival. If Jose pays his weekly extortion fee, chances are he'll survive.
And since I'm usually sitting in the passenger seat, chances are so will I.

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Brazil debates treatment options in crack epidemic

RIO DE JANEIRO (AP) — Bobo has a method: Cocaine gets him through the day, when he cruises with a wheelbarrow around a slum on Rio's west side, sorting through trash for recyclables to sell. At night, he turns the day's profit into crack.
"Sometimes I don't sleep at all; I'm up 24 hours," says Bobo, a former soldier who doesn't use his given name for safety reasons. "I work to support my addiction, but I only use crack at night. That drug takes my mind away. I lose all notion of what I'm doing."
Bobo says balancing crack with cocaine keeps him working and sane. On the shantytown's streets, life can be hell: Addicts unable to strike Bobo's precarious balance use crack day and night, begging, stealing, prostituting themselves, and picking through trash to make enough for the next hit. For them, there's no going home, no job, nothing but the drug.
With a boom in crack use over the past decade, Brazilian authorities are struggling to stop the drug's spread, sparking a debate over the legality and efficiency of forcibly interning users. Brazil today is the world's largest consumer of both cocaine and its crack derivative, according to the Federal University of Sao Paolo. About 6 million adults, or 3 percent of Brazilians, have tried cocaine in some form.
Rio de Janeiro has taken the lead in trying to help the burgeoning number of users with an approach that city leaders call proactive, but critics pan as unnecessarily aggressive. As of May 2011, users living in the streets have been scooped up in pre-dawn raids by teams led by the city's welfare department in conjunction with police and health care workers. By Dec. 5, 582 people had been picked up, including 734 children.
The sight is gut-wrenching. While some people go meekly, many fight, cry, scream out in desperation in their altered states. Once they're gone, their ratty mattresses, pans, sweaters and few other possessions are swept up by a garbage removal company.
Adults can't be forced to stay in treatment, and most leave the shelters within three days. But children are kept in treatment against their will or returned to parents if they have a family. In December, 119 children were being held in specialized treatment units.
Demand for crack has boomed in recent years and open-air "cracolandias," or "crack lands," popped up in the urban centers of Rio and Sao Paulo, with hundreds of users gathering to smoke the drug. The federal government announced in early 2012 that more than $2 billion would be spent to fight the epidemic, allotting money to train health care workers, buy thousands of hospital and shelter beds, and create transitional centers for recovering users.
Mobile street units stationed near cracolandias are among the most important and visible aspects of the government's approach. The units, housed in metal containers, bring doctors, nurses, therapists and social workers to the areas where users concentrate. Slowly, by offering health care and other help, the units' workers gain the trust of users and refer them to treatment centers.
Studies suggest the approach can work: 47 percent of the crack users surveyed in Sao Paulo said they'd welcome treatment, according to the Federal University of Sao Paulo study.
Ethel Vieira, a psychologist on the raid team, thinks their persistence is paying off.
"Initially, they'd run away, react aggressively, throw rocks," she said of users. "Now most of them understand our intention is to help, to give them a chance to leave the street and to connect with the public health network."
Human rights groups object to the forced commitment of children, saying treatment delivered against the will of patients is ineffective. They also oppose the sweeps, which they describe as violent.
"There are legal procedures that must be followed and that are not being followed. This goes against the law and is unconstitutional," Margarida Pressburguer, head of the Human Rights Commission for Brazil's Association of Attorneys, said during a debate last year.
Rio Mayor Eduardo Paes suggested in October that the city would start forcing adults into treatment. "A crack addict isn't capable of making decisions," Paes said from the Jacarezinho shantytown in the week after police stormed the area and seized control of what was then Rio's largest cracolandia.
The Rio state Attorney General's Office responded by telling city officials "the compulsory removal of adults living in the streets has no legal foundation." It said adults can be committed only when they become a danger to themselves or others and outpatient treatment options have run out.
"They give us a place to sleep, food, clothes, everything," said Bobo. "I've been picked up by the city and I liked it. They are doing this for our good."
But even as Bobo endorsed the city's approach, a friend was stepping over to the drug stand for more cocaine. Bobo asked for $5 worth of drugs — cocaine for now, crack for later. Then he rolled up a bill and dumped a small mound of white powder in his palm for snorting.
With a nose full of cocaine, he set off, ready for another day.

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President's brother speaks out on Colombia talks

BOGOTA, Colombia (AP) — A brother of Colombian President Juan Manuel Santos has revealed that the country's largest guerrilla group had initially proposed to hold peace talks within Colombia or in neighboring Venezuela, rather than in Cuba.
Enrique Santos said in an article published in the newspaper El Espectador on Sunday that the government's team had insisted that the talks not be held in Colombia.
"We decided on Cuba for security and above all because it guaranteed confidentiality," Santos wrote in the article.
Representatives of the Colombian government and the Revolutionary Armed Forces of Colombia, or FARC, began discussions in Havana on Nov. 19 seeking a deal to end the country's decades-old conflict. They currently are taking a holiday break and are to resume talks on Jan. 14.
Santos, a journalist and former director of the Colombian newspaper El Tiempo, is not a member of the team involved in the current talks, though he has acted as an adviser to the government negotiators.
He revealed details of earlier discussions with the rebels starting in February 2011. He said he has been involved "in an irreversible way in this process."
Santos said that one especially complicated matter was getting one of the rebel leaders, Jaime Alberto Parra Rodriguez, to make the trip to Cuba for those initial discussions. Santos said the rebels were distrustful of the plans to shuttle away Parra, who is better known by the nom-de-guerre Mauricio Jaramillo or the nickname "El Medico."
"It was very hard to convince the FARC to ... accept putting (Parra) on a helicopter supplied by the state," Santos wrote. "At the time of picking him up, he appeared guarded by more than 50 men armed to the teeth. In the end there was crying by women guerrillas and a farewell ceremony. That was the first big achievement: getting Jaramillo to Havana. That process lasted nearly a year."
Santos said he and others arrived in Havana on Feb. 23, 2011, ahead of their first contacts with the guerrillas, and that after sitting together about 70 times, they finally signed a preliminary accord in August 2012 to launch the peace talks. Until they reached that point, Santos said, "various times we were on the verge of breaking off" the discussions.

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Swiss lender ZKB says three charged by U.S. authorities

Swiss lender Zuercher Kantonalbank (ZKB) said two of its bankers and one former employee had been charged by U.S. authorities, which had accused them of helping U.S. clients avoid taxes.
The three were indicted over changes of conspiring with American clients to hide more than $420 million from the U.S. Internal Revenue Service, the U.S. Attorney's Office in Manhattan had said on Wednesday.
The indictment did not identify the bank concerned but named Stephan Fellmann, Otto Hueppi and Christof Reist, who it said were all former client advisers for the unnamed institution.
None of the bankers had been arrested, authorities said.
Banking secrecy is enshrined in Swiss law and tradition but has recently come under pressure as the United States and other nations have moved aggressively to tighten tax law enforcement and demand more openness and cooperation.
U.S. authorities are investigating at least 11 banks, including Julius Baer , Credit Suisse and other Swiss regional banks, along with UK-based HSBC Holdings and Israel's Hapoalim, Mizrahi-Tefahot Bank Ltd and Bank Leumi .
In February, Wegelin & Co, Switzerland's oldest private bank, was indicted.
UBS AG , the largest Swiss bank, in 2009 paid a $780 million fine as part of a settlement with U.S. authorities who charged the bank helped thousands of wealthy Americans hide billions of dollars in assets in secret Swiss accounts.
ZKB said in a statement it was cooperating with U.S. authorities. The bank said it could give no details about the employees due to the ongoing investigation and did not confirm what they had been changed with.
ZKB bankers Fellmann and Reist could not be reached for comment. Hueppi declined to comment.

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Existing home sales rise to fastest pace in three years

WASHINGTON (Reuters) - Home resales rose sharply in November to their fastest pace in three years, a sign the recovery in the housing market is gaining steam.
The National Association of Realtors said on Thursday that existing home sales climbed 5.9 percent last month to a seasonally adjusted annual rate of 5.04 million units.
That was the fastest since November 2009, when a federal tax credit for home buyers was due to expire. Sales were well above the median forecast of a 4.87 million-unit rate in a Reuters poll.
The U.S. housing market tanked on the eve of the 2007-09 recession and has yet to fully recover, but steady job creation has helped the housing sector this year, when it is expected to add to economic growth for the first time since 2005.
NAR economist Lawrence Yun said superstorm Sandy, which slammed in the U.S. East Coast in late October and disrupted the regional economy for weeks, had only a slight negative impact on home resales.
The NAR expects some purchases delayed by the storm to add a slight boost to resales over the next few months, Yun said.
Nationwide, the median price for a home resale was $180,600 in November, up 10.1 percent from a year earlier as fewer people sold their homes under distressed conditions compared to the same period in 2011. Distressed sales include foreclosures.
The nation's inventory of existing homes for sale fell 3.8 percent during the month to 2.03 million, the lowest level since December 2001.
At the current pace of sales, inventories would be exhausted in 4.8 months, the lowest rate since September 2005.
Distressed sales fell to 22 percent of total sales from 29 percent a year ago.
The share of distressed sales, which also include those where the sales price was below the amount owed on the home, was also down from 24 percent in October.

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New York City should hike taxes on big business-comptroller

New York City's top financial officer and possible contender for mayor in 2013, John Liu, proposed on Thursday tax hikes for big businesses and an end to Madison Square Garden's $15 million annual property tax exemption.
The proposals by New York City Comptroller John Liu include tax hikes on private equity firms, which would help offset his plan for $500 million in tax breaks and lowered fines for 90 percent of the city's small businesses.
Liu is expected to vie for the Democratic mayoral nomination for the election in November 2013.
The city could end tax breaks for big companies - more than $250 million of which were handed out last year, Liu said.
The city could also eliminate its $15 million annual property tax exemption for Madison Square Garden, the indoor arena in midtown Manhattan that's home to the New York Knicks basketball team. Madison Square Garden has been exempt from paying taxes on real property since 1982 under New York state law.
The arena is owned by The Madison Square Garden Co, which also owns the Knicks and other professional sports teams. The company also owns Radio City Music Hall, the Beacon Theatre and others venues, as well as television networks.
Liu also proposed examining tax breaks for special interests. Insurance companies, for instance, have not paid the general corporation tax since 1974, at a cost of $300 million annually to the city, he said.
Private equity firms could also start paying the unincorporated business tax for carried interest or gains from assets being held for investment. The exemption costs New York City about $200 million a year, Liu said.
Liu's package would use the revenue generated by those measures to offset his plan to ease the tax burden for small businesses.
He proposed ending the city's general corporation tax for all businesses with liabilities under $5,000 -- about 240,000 business in the city, or 85 percent of those that currently pay the tax.
His plan would also reduce some fines, as well as exempt businesses that make less than $250,000 in annual income from the city's unincorporated business tax.
The proposals would have to be approved by the governor and state legislature after a request by the city council.
The city is facing a possible $2.7 billion gap in fiscal 2014 that could grow to $3.8 billion the following year, Liu said.

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Republicans push own "fiscal cliff" plan; talks frozen

WASHINGTON (Reuters) - Republicans in the Congress pushed ahead on Thursday with a "fiscal cliff" plan that stands no chance of becoming law as time runs short to reach a deal with President Barack Obama to avert a Washington-induced economic recession.
House of Representatives Speaker John Boehner's "Plan B" to limit income-tax increases to the wealthiest sliver of the population appeared likely to pass the House on Thursday evening after it narrowly cleared a procedural hurdle in the afternoon.
However, Obama has vowed to veto the plan, and Senate Majority Leader Harry Reid said he will not bring it up for a vote in the Democratic-controlled chamber. White House spokesman Jay Carney called it a "multi-day exercise in futility."
Still, passage of Plan B could give Boehner the political cover he needs to strike a deal that would break with decades of Republican anti-tax orthodoxy.
"Time's running short. I'm going to do everything I can to protect as many Americans from an increase in taxes as I can," Boehner told a news conference.
Though it does not raise taxes on as many affluent Americans as Obama wants, the bill would put Republicans on record as supporting a tax increase on those who earn more than $1 million per year - a position the party opposed only weeks ago.
That could make it easier eventually to split the difference with Obama, who wants to lower the threshold to households that earn more than $400,000 annually. Obama also faces resistance on his left flank from liberals who oppose cuts to popular benefit programs, which Republicans say must be part of any deal.
Obama and Boehner will need to engage in more political theater to get lawmakers in both parties to sign on to the painful concessions that will have to be part of any deal to avert the cliff and rein in the national debt, analysts say.
"They are now in the mode where they have to demonstrate how hard they're trying to get everything they can," said Joe Minarik, a former Democratic budget official now with the Committee For Economic Development, a centrist think tank.
Even as he pressured Obama and the Democratic Senate to approve his plan, Boehner indicated that he was not willing to walk away from the bargaining table.
"The country faces challenges, and the president and I, in our respective roles, have a responsibility to work together to get them a result," Boehner said.
TIME RUNNING OUT
Obama and Boehner aim to reach a deal before the end of the year, when taxes will automatically rise for nearly all Americans and the government will have to scale back spending on domestic and military programs. The $600 billion hit to the economy could push the U.S. economy into recession, economists say.
Investors so far have assumed the two sides will reach a deal, but concerns over the fiscal cliff have weighed on markets in recent weeks. The S&P 500 index of U.S. stocks was up 0.4 percent in Thursday trading, despite a round of strong data on economic growth and housing.
"The closer we get to the end of the year without a deal, the more optimism is going to evaporate," said Todd Schoenberger, managing partner at LandColt Capital in New York.
Shares crept up after Boehner said he was prepared to work with Obama to prevent the fiscal cliff from kicking in.
Lawmakers are eager to wrap up their work and return home for the Christmas holiday, but congressional leaders kept the door open for last-minute action.
The Senate was expected to leave town on Thursday or Friday, but Reid said it could return next week to vote on any deal.
Boehner indicated the House would stay in session after Thursday's vote, scheduled for 7:45 p.m. EST (0045 GMT on Friday).
Several influential conservative groups have condemned Plan B, and some Republicans are expected to vote against it. But passage appeared likely after the House narrowly voted by 219 to 197 to bring the bill to the floor for debate.
The U.S. Chamber of Commerce, an influential business group that has often tangled with the Obama administration, offered grudging support.
"We are not comfortable allowing tax increases on anyone in this environment. However, we understand that, at times, politics requires compromise," the Chamber's top lobbyist, Bruce Josten, wrote in a letter to lawmakers.
To placate conservatives, Boehner also scheduled a vote on legislation that would shift $55 billion in scheduled defense cuts to cuts in food and health benefits for the poor and other domestic programs.
That measure also would roll back some of the Dodd-Frank financial regulation reforms of 2010. It is not expected to become law.

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Canada's seven-month budget gap narrows to C$10.6 billion

 Canada's federal budget deficit narrowed in the first seven months of the fiscal year to C$10.57 billion ($10.68 billion) from C$13.90 billion in the same period last year as personal and corporate income tax revenues rose and debt charges were lower.
The monthly shortfall in October was C$1.68 billion, compared with a gap of C$2.13 billion a year earlier, the Department of Finance said in a report on Friday.
The Conservative government in October pushed back by one year, to 2016-17, the date it expects to eliminate the deficit. Most economists believe that if the economy continues to grow, the books could be balanced sooner.
Ottawa has estimated a 2012-13 deficit of C$26 billion, including a C$1 billion cushion for risk.
In the April-October period, revenues increased by 3.6 percent, or C$4.9 billion, from the same period in 2011, pushed up by personal income tax and corporate income tax. Program expenses rose by 2 percent, or C$2.7 billion, on increases in elderly benefits and direct program expenses.
Public debt charges decreased 6.1 percent, or C$1.1 billion, on a lower effective interest rate.

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