In Israel, Netanyahu Expects Extension to Form Coalition

JERUSALEM — Prime Minister Benjamin Netanyahu expects Israel’s president to give him a two-week extension this weekend to form a governing coalition, but mathematics and chemistry complicate his task to solve a complicated political puzzle.

Mr. Netanyahu, Israeli analysts say, finds himself in a bind: his coalition options have been curtailed by an unexpected alliance between two rising stars bent on preventing his longstanding ultra-Orthodox allies from joining the next government.

The newcomer Yair Lapid, a former television host, stunned the political establishment when his centrist party, Yesh Atid, placed second in the January elections. It won 19 seats in the 120-seat Parliament, positioning Mr. Lapid as a power broker. Adding to his bargaining power, Mr. Lapid has forged an unlikely negotiating alliance with Naftali Bennett’s right-wing Jewish Home, the winner of 12 seats.

Mr. Netanyahu, whose rightist Likud-Beiteinu faction has 31 seats, needs at least one of those two parties to be able to form a coalition with a majority of 61 or more. But he would also like to maintain his long partnership with the ultra-Orthodox.

So far, Mr. Lapid and Mr. Bennett have pledged to go into the coalition together or not at all. “I do not recall such a strong alliance between two such different parties,” said Gadi Wolfsfeld, a professor of political communication at the Interdisciplinary Center in Herzliya, Israel. “These two leaders seem to have chemistry, and the one thing they share is a desire for a government without the ultra-Orthodox. Wow!”

The pair’s argument for not including the ultra-Orthodox parties hinges on promises to end exemptions from compulsory military or civilian national service for ultra-Orthodox young men engaged in Torah studies. The demand for a more equal sharing of the burden was popular among the middle-class voters championed by Mr. Lapid and in Mr. Bennett’s camp.

But Likud members say that Mr. Lapid’s opposition to including the ultra-Orthodox in a coalition goes beyond that.

After talks with Yesh Atid and Jewish Home on Thursday and Friday, David Shimron, a lawyer representing Likud-Beiteinu, told reporters that Mr. Netanyahu wanted to form as broad a coalition as possible but that Mr. Lapid would rule out the ultra-Orthodox as coalition partners even if the ultra-Orthodox “were drafted at the age of 14.”

“A whole public is being boycotted,” Mr. Shimron added. “We don’t accept boycotts, and we’ll have to see how we move forward to form the government under these circumstances.”

Shas, the largest ultra-Orthodox party representing Sephardic Jews, has been a mainstay of many governments led by the right and the left since it was founded in 1984. It was last excluded, from Ariel Sharon’s government in 2003, on the insistence of the staunchly anti-religious Shinui Party, which was led by Mr. Lapid’s father, Yosef.

A brief honeymoon period between Mr. Netanyahu and Yair Lapid after the elections quickly soured after Mr. Lapid spoke about his intention to replace Mr. Netanyahu as prime minister, possibly within 18 months.

So far, Mr. Netanyahu has found only one new coalition partner: the small Hatnua Party, led by Tzipi Livni, a former foreign minister and a longtime critic of Mr. Netanyahu’s handling of the Palestinian conflict. She has been promised the post of justice minister and a leading role in any talks with the Palestinians.

But a government without Shas will leave Mr. Netanyahu more vulnerable; his conservative Likud Party emerged weakened from the elections, with Yesh Atid and the Jewish Home each holding the power to make or break any potential coalition.

Mr. Netanyahu’s decision to run on a joint ticket with the ultranationalist Yisrael Beiteinu Party of his former foreign minister, Avidgor Lieberman, “deterred voters on all fronts — centrists, Sephardim, national religious,” said Abraham Diskin, a political scientist at the Hebrew University of Jerusalem and the Interdisciplinary Center. “These are the results. Mr. Netanyahu would be much stronger with Shas in the coalition. His maneuvering capability has definitely been limited.”

But political experts also note that coalition deals in Israel are rarely written in stone. Shas, despite its remonstrations to the contrary, could join Mr. Netanyahu’s next coalition later, after new legislation on the military obligations of the ultra-Orthodox has been resolved.

Most Shas voters already serve in the army, said Asher Cohen of Bar Ilan University, adding: “Shas will always want to be in the coalition. There is no historical basis to believe that it won’t.”

With an extension, Mr. Netanyahu will have until mid-March to forge a new government. If he fails, President Shimon Peres could ask another party leader to take on the task.

“Netanyahu needs to form a coalition and get through the vote of confidence in Parliament,” said Gideon Rahat of Hebrew University. “After that, he can always change the makeup of the coalition. The day after the vote of confidence, Lapid could leave and Shas could join. I’m not getting excited.”

As a politician, Mr. Rahat said, Mr. Netanyahu “is no magician.”

“But the state of politics in Israel is so bad,” he added, “that even someone who is not especially successful can succeed.”

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With Cuts Just Hours Away, Lawmakers Go to White House

WASHINGTON — President Obama and the four top lawmakers in Congress were meeting Friday morning even as across-the-board spending cuts were poised to go into effect by the end of the day.

Mr. Obama summoned the Congressional leadership to the Oval Office in an effort to discuss how to move forward in the wake of the failure to avoid the cuts, known as sequestration, White House aides said. They said Mr. Obama would continue to push for a long-term budget deal that includes spending cuts and tax increases.

“We have an opportunity here still on the table for Congress to take up a balanced deal that would complete the job, and then some, of achieving more than $4 trillion of deficit reduction over 10 years, in a balanced way that helps our economy grow, that helps it create jobs,” Jay Carney, the president’s press secretary, said Thursday.

But ahead of Friday’s meeting, Republican leaders made clear that they had no intention of agreeing to such a deal, and said the president was prolonging the automatic cuts by insisting on tax increases. In a statement issued Friday morning, Senator Mitch McConnell of Kentucky, the Republican leader, showed little evidence of wavering.

“I’m happy to discuss other ideas to keep our commitment to reducing Washington spending at today’s meeting,” Mr. McConnell said. “But there will be no last-minute, back-room deal and absolutely no agreement to increase taxes.”

The meeting between the president and the four lawmakers — Speaker John A. Boehner; Senator Harry Reid, the majority leader; Representative Nancy Pelosi of California, the Democratic leader; and Mr. McConnell — is the first time since the end of last year that the group has gathered for a direct discussion about their differences.

But the fact that the meeting was scheduled for the day the automatic cuts go into effect — and after members of Congress have left town for the weekend — was a clear signal that no one expects to make serious progress toward an agreement to undo the cuts.

Republicans once denounced the across-the-board cuts as bad policy, especially for the military. But many in the party have now embraced them as a way to trim the size of government over the objections of the president and Democrats in Congress.

Mr. Obama’s top advisers believe the impact of the cuts will be severe enough over the next several weeks that Republican lawmakers will be forced back to the bargaining table.

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U.S. Economy Barely Grew in Fourth Quarter, Revision Shows

Breathe a tiny sigh of relief, if not exactly contentment: the American economy grew just barely in the last quarter of 2012.

Output expanded at an annual rate of just 0.1 percent, which is basically indistinguishable from having no growth at all and is far below the growth needed to get unemployment back to normal. But at least the economy did not shrink, as the Commerce Department had originally estimated last month, when the first report suggested that output contracted by an annual rate of 0.1 percent.

The department’s latest estimate for economic output, released Thursday, showed that growth was depressed by declines in military spending (possibly in anticipation of the across-the-board spending cuts set to begin Friday) and the amount that companies restored their stockroom shelves.

“The good news with business inventories is that what they take away in one quarter they tend to add to the next,” said Paul Ashworth, senior United States economist at Capital Economics, referring to the measure of this restocking process. “So there’s a good chance that first-quarter numbers will be better than originally thought.”

The output growth number was revised upward from the original estimate partly thanks to updated, and improved, data on business investment and net trade. Imports were lower than previously reported and exports were higher.

Economists expect that government spending will continue to drag on the economy this year, especially if Congress does not avert the spending cuts, which would shave around 0.6 percentage point off growth. Many are hoping that even if the cuts go through, Congress will reverse them in short order.

“They can always change their minds when they have to renew the continuing budget resolution at the end of this month or in April or May,” said Mr. Ashworth. “My expectation is that at most the cuts stay a month or two, and in most departments, with a wink or a nod, they won’t do anything crazy.”

Even if government does lop off $85 billion in the so-called sequester, as current law states, the private sector will offset most of this drag, thanks to the housing recovery and other sources of strength. Forecasts for the first quarter are for annual growth around 2.4 percent to 3 percent.

Monetary stimulus from the Federal Reserve, while under fire from some Republicans, is also helping offset the fiscal contraction.

“With monetary policy working with a lag and still being eased, the boost to the economy is probably still growing,” said Jim O’Sullivan, chief United States economist at High Frequency Economics.

The combination of monetary expansion and fiscal tightening has helped lead to a painfully slow drawdown in the unemployment rate. The jobless rate stood at 7.9 percent in January. The recent end of the payroll tax holiday is also expected to hold back consumer spending, and so job growth as well.

“I think it’s largely steady as she goes for employment,” said Jay Feldman, an economist at Credit Suisse, of the indications from the latest growth report. “I still think we’re in kind of a 175,000-jobs-a-month clip for a while, but with some downside risks later in the year from the sequester.”

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17 Afghan Police Officers Drugged and Killed

KABUL, Afghanistan — Suspected Taliban infiltrators killed 20 Afghan policemen in two attacks on Wednesday, including a mass poisoning, in southeastern Afghanistan.

In Ghazni Province, a group of 17 Afghan policemen who had just been trained by the Americans were drugged into comatose stupors by comrades while on duty and then shot to death in what appeared to be the single worst incident in a string of similar attacks, according to Afghan officials and an insurgent spokesman.

In Kandahar Province, three policemen were killed in what the Taliban said was an attack carried out by one of its supporters, although police officials attributed the killings to a relative of one of the victims.

The Ghazni attack took place at a remote Afghan Local Police outpost in Habib Godala village in the Andar district at about 1 a.m., according to Gen. l Zrawar Zahid, the Ghazni police chief.

Other Afghan officials said authorities had already arrested two policemen, described as Taliban infiltrators who had carried out the attack. The attackers poisoned the dinner food of the other officers, shot them at close range to ensure they were dead, stole their weapons and fled after setting a police vehicle on fire.

General Zahid said that 10 of the victims were Afghan Local Police officers who had finished their training, and the other seven were recruits who had been undergoing training.

The Afghan Local Police program has been contentious in many parts of Afghanistan because of prominent insider attacks as well as accusations of human rights violations by the policemen.

The local police officers are vetted and trained under the supervision of American Special Operations troops as self-defense forces for their own communities, and sometimes include groups of armed men who had formerly sided with the Taliban.

This unit, which was completely wiped out by the attack, had been trained by the Americans at a base in the Andar district center a month ago, according to local officials. Only a week earlier, there was another similar attempt to drug policemen in that district, but the drug had not been strong enough and the victims were able to escape an attack, according to Khalil Hotaki, head of a peace group in Ghazni.

“We have repeatedly warned the A.L.P. recruiters and trainers to conduct proper and accurate vetting processes for people who want to join the A.L.P. ranks,” said Fiazanullah Fiazan, a former provincial governor in Ghazni. “We have told them not to enroll unknown people or people who are not vouched by tribal elders, but they don’t listen. They are trying to meet the recruiting deadline and get credit for it.”

A spokesman for the Special Operation troops in Afghanistan could not be reached for comment. A spokesman for the NATO-led International Security Assistance Force referred all questions to Afghan officials.

A spokesman for the Taliban, Zabiullah Mujahid, e-mailed a statement to journalists claiming responsibility for the attack.

“Locals in the area were tired of the atrocities and crimes of these arbakais and their lives and property were not safe,” Mr. Mujahid wrote, using the Afghan term for irregular militias. The deaths of the police officers, he said, meant that “oppression has been weakened and decreased in the area.”

In the Kandahar incident, authorities said the bodies of three National Police officers were found outside their police post on the outskirts of Kandahar City, shot to death. A spokesman for the police, Ghorzang, who like many Afghans goes by only one name, said the attacker was not an insurgent, but a heroin addict and a relative of the post commander, who was one of the victims.

Mr. Ghorzang said the commander had taken the relative to get treatment, and after the police in the post fell asleep he took one of their guns and killed him and two other officers. The attacker, who was not identified by name, escaped.

But a spokesman for the Taliban in southern Afghanistan, Qari Yousuf Ahmadi, reached by telephone, said that the insurgents had recruited the attacker and took responsibility for the attack.

The attacks were just the latest in a series of such insider attacks, often involving the use of poisons or drugs to subdue other policemen, who are then shot while unconscious. Typically, rat poison is used but the victims are shot as well because the poison is not always fatal when delivered in food.

“This type of attack is so deadly and disastrous, both in terms of loss of human life and in critically undermining trust and confidence among the Afghan national security forces and in particular the A.L.P.,” said retired Gen. Atiqullah Amarkhel, an Afghan military analyst. “We have a large number of cases similar to last night’s attack in Ghazni.”

In January, an Afghan Local Police officer killed his commander and several colleagues in that manner, in Panjwai District of Kandahar Province. In a 10-day-long period in December, there were at least three such attacks by local policemen or others, resulting in 17 deaths.

Taimoor Shah contributed reporting from Kandahar, and Sangar Rahimi and another Afghan employee of The New York Times from Kabul.

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Fed Chairman Defends Stimulus Efforts

WASHINGTON – The Federal Reserve chairman, Ben S. Bernanke, on Tuesday downplayed objections raised by some Fed officials about the central bank’s efforts to stimulate the economy, saying the policies are both necessary and effective.

Mr. Bernanke, in written testimony submitted to the Senate Banking Committee, also urged Congress and the Obama administration to replace the sequestration cuts scheduled to begin Friday with a plan to reduce federal deficits more gradually.

“Although monetary policy is working to promote a more robust recovery, it cannot carry the entire burden of ensuring a speedier return to economic health,” Mr. Bernanke said. He warned that the combination of previous spending cuts and sequestration “could create a significant headwind for the economic recovery.”

Still, Mr. Bernanke was relatively upbeat about the health of the broader economy, which he described as growing at a “moderate if somewhat uneven pace.”

He said disappointing growth in the fourth quarter “does not appear to reflect a stalling-out of the recovery.” Consumer demand kept rising and, he said, “Available information suggests that economic growth has picked up again this year.”

Mr. Bernanke, who reports to Congress on monetary policy twice each year, used his written testimony to strongly defend the Fed’s expansion of its economic stimulus campaign in September and December to reduce unemployment more quickly. He will answer questions from the Senate committee Tuesday morning, then testify before the House Financial Services Committee on Wednesday morning.

The Fed, which has amassed almost $3 trillion in Treasury and mortgage-backed securities, is expanding those holdings by $85 billion a month until it sees clear improvement in the labor market. It plans to hold short-term interest rates near zero even longer, at least until the unemployment rate falls below 6.5 percent.

“In the current economic environment, the benefits of asset purchases, and of policy accommodation more generally, are clear,” Mr. Bernanke said. “Monetary policy is providing important support to the recovery” while keeping inflation in check.

The asset purchases and the interest-rate policy are designed to reduce borrowing costs for businesses and consumers. Mr. Bernanke said the recovery of the housing market and higher sales of automobiles, among other durable goods, demonstrated the benefit of the Fed’s campaign.

Fed Governor Jeremy C. Stein and some other Fed officials have expressed concern in recent months that low interest rates are encouraging excessive risk-taking by investors pursuing higher returns. Mr. Stein in a recent speech highlighted rising demand for junk bonds and certain kinds of real estate investments, and shifts in bank balance sheets, as areas of potential concern.

Mr. Bernanke said Tuesday that the Fed takes these concerns “very seriously,” noting that the central bank has significantly expanded its efforts to monitor financial markets, and has given greater priority to financial regulation.

But he noted that low interest rates also were helping to strengthen the financial system, by encouraging companies to increase reliance on long-term funding, allowing debt levels to decline and strengthening growth.

He added that he saw no reason to consider a change in course.

“To this point we do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more rapid job creation,” Mr. Bernanke said.

He also downplayed the concern expressed by some Fed officials and analysts that the central bank’s plans to control inflation as the economy recovers could be complicated by a political backlash because it may lose money as it sheds some of its vast holdings of Treasuries and mortgage bonds.

Such losses could be large enough to prevent the Fed from transferring profits to the Treasury Department for the first time since 1934, according to a Fed analysis.

Mr. Bernanke, noting the Fed has transferred $290 billion to Treasury since 2009, said it was “highly likely” Treasury still would see a net benefit from the purchases because any losses would not exceed those profits.

“Moreover, to the extent that monetary policy promotes growth and job creation, the resulting reduction in the federal deficit would dwarf any variation in the Federal Reserve’s remittances to the Treasury,” he said.

When Mr. Bernanke last appeared before Congress in July, he identified three major obstacles to faster growth: the depressed housing market, the financial crisis in Europe, and American fiscal policy. In his prepared testimony Tuesday, he did not mention Europe and barely touched on housing. But he warned that government policy was continuing to slow the pace of economic growth.

The recent agreements to reduce deficits, Mr. Bernanke said, focused on short-term spending cuts while doing little to address longer-term imbalances.

“To address both the near- and longer-term issues,” he said, “the Congress and the administration should consider replacing the sharp, front-loaded spending cuts required by the sequestration with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run.”

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DealBook: Barnes & Noble Chairman Leonard Riggio to Bid for Bookstore's Retail Business

Correction Appended

The chairman of Barnes & Noble plans to bid for the retail business of the bookstore chain he started 40 years ago, as the company struggles with a changing competitive landscape.

On Monday, Leonard Riggio told the company’s board that he would make an offer for Barnes & Noble Booksellers, barnesandnoble.com and other retail assets. The proposal would not include the e-book division, Nook Media.

Like many retailers, the company is confronted by waning profit in its core business, as online retailers and other competitors gain market share. Barnes & Noble recently warned that earnings would be weak in the latest quarter, with losses rising in its Nook Media division.

Conceived as a serious competitor to Amazon.com’s Kindle, the Nook has instead become an also-ran in the race for digital book supremacy. The Kindle remains the top-selling dedicated e-reader, while the iPad consistently leads the competition among tablets. Amazon’s Kindle app has also maintained a huge lead in popularity, limiting Barnes & Noble’s reach across the broader digital bookselling landscape.

It is the boldest move yet by Mr. Riggio, the company’s largest shareholder who owns nearly 30 percent of Barnes & Noble, to try and save the company.

After building a small chain of college bookstores, Mr. Riggio in the 1970s bought the Barnes & Noble name and the flagship location in Manhattan, which had run into trouble. Over the next several decades, he built the company into the nation’s biggest brick-and-mortar bookseller.

In recent years, Mr. Riggio has fended off challenges from the likes of the billionaire Ronald W. Burkle. As part of that effort, Mr. Riggio argued, in large part, that the company was well-positioned in the future by betting on the Nook and digital books.

Others believed in the promise of the e-reader as well.

Microsoft paid $300 million in April for a 17.6 percent stake in the Nook business, valuing it then at $1.7 billion. Microsoft also secured Barnes & Noble’s commitment to produce an e-reader app for its Windows 8 operating system. And in December, the British publisher Pearson agreed to buy a 5 percent stake for $89.5 million.

Mr. Riggio, plans to negotiate the price with the board, according to a regulatory filing. The proposal is expected to be mainly in cash. The retailer’s board had already been weighing whether to spin off its Nook unit.

Barnes & Noble said in a statement that it had formed a special board committee of three directors – David G. Golden, David A. Wilson and Patricia L. Higgins – to consider Mr. Riggio’s proposal. The committee will be advised by Evercore Partners and the law firm Paul, Weiss, Rifkind, Wharton & Garrison.

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Correction: February 25, 2013

An earlier version of this article referred imprecisely to the role of its largest shareholder, Leonard Riggio, in the company’s history. While Mr. Riggio founded the modern company that acquired the name in the 1970s, William Barnes and G. Clifford Noble opened the original Barnes & Noble bookstore, in 1917.

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Palestinians Demand Inquiry Into Detainee’s Death in Israel

JERUSALEM — Palestinian officials on Sunday called for an international investigation into the death of a 30-year-old prisoner in an Israeli jail, saying the man was tortured during interrogation, as thousands of Palestinian prisoners went on a one-day hunger strike in protest.

“Israel is responsible for what happened,” Issa Qaraqa, the Palestinian minister for prisoner affairs, said at a news conference in Ramallah, in the West Bank.

“I accuse the State of Israel of subjecting him to tough physical and psychological pressure,” Mr. Qaraqa said. “He was subjected to a heavy and severe torture.”

Israeli authorities said the prisoner, Arafat Jaradat, died of a heart attack. An autopsy was scheduled for Sunday, with a Palestinian forensic specialist and a relative of Mr. Jaradat scheduled to attend.

Amid intensifying demonstrations in the West Bank that some officials and analysts see as the stirrings of a third intifada, or uprising, Israel on Sunday transferred to the Palestinian Authority $100 million in tax revenue that it had been withholding. Isaac Molho, Prime Minister Benjamin Netanyahu’s special envoy, also sent a message to the Palestinian leadership that Israeli officials described as an “unequivocal demand to restore quiet on the ground.”

Israel has refused Palestinian requests to release four prisoners whe have been on long-term hunger strike or 123 people who have been detained since before the signing of the Oslo Accords in 1993. “Some of these people are accused of very heinous crimes,” a senior Israeli official said, speaking on the condition of anonymity because he was not authorized to discuss the matter with the news media. “They’re saying that every Palestinian hunger striker should have a get-out-of-jail-free card. You can’t have a system like that. It’s not sustainable.”

After days of demonstrations in solidarity with the hunger strikers that have included clashes with Israeli soldiers and settlers, hundreds of Palestinians turned out Sunday in several cities and villages to protest Saturday’s death of Mr. Jaradat, who relatives said worked in a gas station and was the father of a 4-year-old girl and 2-year-old boy. Demonstrators in Gaza waved the flags of Palestinian political factions along with banners reading “Tortured” and “Their freedom is our responsibility.”

“We will resort to all means to liberate the prisoners,” said Sami Abu Zuhri, a spokesman for Hamas, the militant Islamist party that rules the Gaza Strip.

Atallah Abu al-Sabah, Hamas’s minister of prisoner affairs, criticized Palestinian leaders in the West Bank for their handling of the issue, and called for kidnapping Israeli soldiers “instead of pursuing playful negotiations that brought nothing to the Palestinian cause.”

Mr. Jaradat was arrested last Monday for throwing stones at Israeli cars near a West Bank settlement during November’s conflict between Israel and the Gaza Strip. Palestinian officials said he admitted the stone-throwing but denied using Molotov cocktails. He also confessed to tossing rocks in a 2006 incident. Officials said his detention was extended 12 days at a hearing on Thursday, during which his lawyer said Mr. Jaradat complained of severe pain in his back and neck that he attributed to his interrogation.

“When he was under interrogation, the interrogator told him, ‘Say goodbye to your kids,’ ” Mr. Jaradat’s uncle, Musa, said at the Ramallah news conference. Musa Jaradat said that his nephew’s father and brothers had all spent time in Israeli jails, and that before his detention, Arafat Jaradat had sought to join the Palestinian security force.

The Palestinian prime minister, Salam Fayyad, issued a statement expressing “deep sorrow and shock” over Mr. Jaradat’s death, saying there was a “need to promptly disclose the true reasons that led to his martyrdom.”

Jodi Rudoren reported from Jerusalem, and Khaled Abu Aker from Ramallah, West Bank. Fares Akram contributed reporting from the Gaza Strip.

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Red Carpet Project

Of all the fashionable events that take place during awards season, the red carpet at the Academy Awards
remains the main attraction. Below, explore an archive of Oscar red carpet looks that spans 15 years.

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Magistrate Grants Bail for Pistorius

Mike Hutchings/Reuters

Oscar Pistorius in court on Friday.

PRETORIA, South Africa — After four days of combative hearings, a South African magistrate on Friday granted bail for Oscar Pistorius, the double amputee track star accused of murdering his girlfriend in a case that has horrified and fascinated the nation and much of the world.

Magistrate Desmond Nair announced the decision after hearing impassioned final arguments from the defense and the prosecution in Courtroom C of the Pretoria Magistrates Court.

The magistrate said Mr. Pistorius did not represent a flight risk and was not likely to interfere with state witnesses. “The accused has made a case to be released on bail,” he concluded, while the prosecution had not established a case for detaining him. Pistorius family members in the packed courtroom shouted, “Yes!”

Magistrate Nair set bail at 1 million rand, about $112,000, and ordered a series of conditions before the case was adjourned to June 4. Mr. Pistorius was told to relinquish firearms and passports and to avoid his upscale home in a gated community where he shot to death his girlfriend, Reeva Steenkamp, in what he has called an accident and prosecutors have called premeditated murder. The home is now a crime scene.

The unusually tight restrictions on Mr. Pistorius also included a prohibition on making contact with witnesses. The athlete was further told that he could not leave the Pretoria area without official permission and could not use drugs or alcohol while the trial is pending. He was instructed to report to a police station twice a week.

Arnold Pistorius, an uncle who has acted as family spokesman, told reporters: “We are relieved by the fact that Oscar got bail today, but at the same time, we are in mourning for Reeva Steenkamp and her family.”

Before announcing his ruling, the magistrate reprised the four days of conflicting arguments by defense and prosecution lawyers. Mr. Pistorius’s shoulders shook with emotion and tears fell from his eyes as, at one point, Magistrate Nair said, “The deceased died in his arms.”

Magistrate Nair took issue particularly with the testimony and actions of the prosecution’s lead investigator, Detective Warrant Officer Hilton Botha, who has since been removed from the case, saying the officer made “several errors and concessions” and “blundered” in gathering evidence.

“It is his evidence that may have been tarnished by cross-examination, not the state case,” he said. At the same time, the state case was not so “strong and watertight” that Mr. Pistorius “must come to the conclusion that he has to flee.”

In a two-hour summary of the case and of the laws governing bail, the magistrate also read a series of character references from friends of the athlete, who described his relationship with Ms. Steenkamp, a 29-year-old model and law school graduate, as loving and happy.

The prosecution had opposed the sprinter’s application to be released on bail until a full trial, arguing that he might flee. It said Mr. Pistorius, 26, murdered Ms. Steenkamp when he fired four shots through a locked bathroom door at his home on Feb. 14 while she was on the other side.

The sprinter, who underwent double amputation as an infant after being born without fibula bones and uses prostheses, has said he believed that the person in the bathroom was an intruder and he never intended to kill Ms. Steenkamp.

Magistrate Nair said that while the prosecution case rested on “nothing more than circumstantial evidence,” there were “improbabilities that need to be explored” in Mr. Pistorius’s account of events.

“The only person who knows what happened there is the accused,” he said. But, he went on, “I cannot find that it has been established that the accused is a flight risk.”

Ultimately, he said, Mr. Pistorius had helped his case for bail by providing a sworn affidavit to the court setting out his version of events.

Lydia Polgreen reported from Pretoria, and Alan Cowell from London.

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Police Replace Pistorius Detective in Embarrassing Setback

PRETORIA, South Africa — The South Africa police replaced the lead investigator in the Oscar Pistorius homicide case on Thursday after embarrassing revelations that he was under investigation himself for seven criminal charges of attempted murder.

The decision by the national police commissioner to remove the investigator, Hilton Botha, was the latest in a series of abrupt twists and setbacks in the prosecution of Mr. Pistorius, the double amputee track star accused of killing his girlfriend. It caused a further delay in the defendant’s hearing on his request to go free on bail in the case that has riveted South Africa and much of the world.

The commissioner, Riah Phiyega, said Mr. Botha would be relieved by Lt. Gen Vinesh Moonoo, whom Ms. Phiyega described as the country’s “top detective,” The Associated Press reported.

The attempted-murder accusations hanging over Mr. Botha only compounded questions about his work on the Pistorius case. Under cross-examination on Wednesday, Mr. Botha was forced to acknowledge sloppy police work and to concede that he could not rule out Mr. Pistorius’s version of events in the shooting death of his girlfriend based on the existing evidence.

“The poor quality of evidence presented by chief investigating officer Botha exposed the disastrous shortcomings in the state’s case,” Mr. Pistorius’s defense lawyer, Barry Roux, said on Thursday.

The courtroom itself became part of the drama on Thursday when the magistrate hearing the case ordered an abrupt and brief suspension because of an unexplained “threat to the court.” The case was later adjourned until Friday.

While the prosecution has accused Mr. Pistorius, 26, of premeditated murder in the killing, Mr. Pistorius has said he opened fire through a locked bathroom door thinking there was an intruder in his home in a gated community and had no intention of killing his girlfriend, Reeva Steenkamp, 29, a model and law-school graduate.

When the bail hearing resumed on Thursday — Mr. Pistorius’s fourth court appearance since the shooting on Feb. 14 — the chief prosecutor, Gerrie Nel, began by acknowledging the attempted murder charges against Mr. Botha, but said prosecutors did not realize that the case had been reinstated when Mr. Botha testified against Mr. Pistorius on Wednesday.

Mr. Nel went on to assail Mr. Pistorius’s defense of his actions in the early hours of Thursday one week ago, when, the athlete has said, he did not realize Ms. Steenkamp was no longer in bed as he rose to investigate the supposed intruder, shouting to her to call the police.

“You want to protect her, but you don’t even look at her. You don’t even ask: Reeva, are you all right?” Mr. Nel said. “His version is so improbable.”

Earlier, the hearing dwelt for some time on the absence of urine from Ms. Steenkamp’s bladder when she died, consistent, the defense said, with the suggestion that she simply went to the toilet rather than fled from Mr. Pistorius after an argument as the prosecution asserts.

Mr. Roux, the defense lawyer, said she may have locked the toilet door after hearing Mr. Pistorius call out that an intruder was in the house.

The case has continued to take a toll on Mr. Pistorius’s global reputation as an emblem of athletic prowess and of triumph over adversity. On Thursday, Nike became the latest corporate sponsor to suspend ties with him. “We believe Oscar Pistorius should be afforded due process, and we will continue to monitor the situation closely,” the company said in a statement on its Web site.

Here in Pretoria, in a development that seemed as bewildering as it was sensational on Thursday, a police brigadier, Neville Malila, said earlier that Detective Botha was set to appear in court in May facing attempted murder charges relating to an episode in October 2011, when Mr. Botha and two other police officers were accused of firing at a minivan carrying seven people.

“Botha and two other policemen allegedly tried to stop a minibus taxi with seven people. They fired shots,” Brigadier Malila said.

South African news reports said the 2011 shooting happened when the officers were pursuing a man accused of killing and dismembering a woman.

Medupe Simasiku, a spokesman for the National Prosecuting Authority, said “the decision to reinstate was taken on Feb. 4, way before the issue of Pistorius” or the shooting death of Ms. Steenkamp “came to light.”

“It’s completely unrelated to this trial,” the spokesman said.

Mr. Botha was quoted in South African news reports as denying claims that he was drunk during the episode in question. He said he and other officers had aimed at the wheels of the minivan without causing injuries and he was convinced that the case had been withdrawn.

The Pistorius case has riveted South Africa and fascinated a wider audience, reflecting Mr. Pistorius’s status as one of the world’s most renowned athletes, whose distinctive carbon-fiber running blades inspired the nickname Blade Runner.

He was born without fibula bones in both legs and underwent amputation before he was one year old. Yet he went on to become a global Paralympic champion and the first Paralympic sprinter to compete against able-bodied runners in the 2012 London Olympics.

The questions surrounding Detective Botha surfaced on Wednesday after he explained how preliminary ballistic evidence supported the prosecution’s assertion that Mr. Pistorius had been wearing prosthetic legs when he shot at a locked bathroom door early on Feb. 14. Ms. Steenkamp wasbehind it at the time.

Mr. Pistorius said in an affidavit read to the court on Tuesday that he had hobbled over from bed on his stumps and had felt extremely vulnerable to a possible intruder as a result.

Lydia Polgreen reported from Pretoria, South Africa, and Alan Cowell from London.

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In Montana’s Kalispell, Guns Are a Matter of Life

Making Guns in Montana:
Kalispell, Mont., has become the center of a growing firearms industry, particularly for high-end rifles and industrial rifle parts.

BIGFORK, Mont. — Jerry Fisher’s big and careful arms cradled a polished cutout of English walnut, which was aging in his workroom like a fine wine. The slight tapering along one edge gave a ghostly hint of its future as the stock of a handmade hunting rifle.

His eyebrows lifted as he explained the properties of this piece of walnut. “This wood will assume the moisture content of the atmosphere you store it in,” he said. “It takes five or six years to dry it.”

Mr. Fisher, 82, is a gunsmith whose exquisite firearms, decorated with designs by fine artists, have attracted customers from around the world. He built on the work of older gunsmiths here, just as younger ones hope to learn from him. He epitomizes the values of the Flathead Valley of northwestern Montana, where people grow up with, relax with and live around guns.

Since the 19th century, hunting has been a pastime in the forests that climb up the tiara of rocky peaks around Flathead Lake. Members of the growing group of high-end gunsmiths say it is the mountains, the air and the game that draw them, not the presence of other artisans. But the area’s reputation for this kind of gunsmithing has also made it a growing destination for more prosaic manufacturing of gun parts and guns — including high-end semiautomatic rifles and military weapons.

In Kalispell, the Flathead County seat, 250 people earn a living making guns or gun parts, a tenfold increase since 2005. That growth helped mitigate the effects of the recession, which was a body blow to construction, a major local employer. Another longtime industry, logging, has also withered.

Clint Walker’s company, New Evolution Military Ordnance, became one of the newest entrants in the business within the last couple of years, joining a roster of companies that included Montana Rifle, McGowen Precision Barrels and SI Defense.

Mr. Walker, who had been an editor of trade magazines covering video equipment, said Montana Rifle was “doing literally tens of thousands of barrels” for large gunmaking companies back East. “They have to slow down and stop what they are doing to help us out,” he said. “And they’ve done that. They said: ‘You guys are local. You’re family.'”

“That is a large part of the success of this area,” Mr. Walker added.

To provide trained hands for companies like these, Flathead Valley Community College started a course in gunsmithing last summer. Students learn everything from hollowing out a barrel to checkering a stock – carving fine crosshatched indentations behind the trigger both for decoration and to create a solid grip.

Jane A. Karas, a former New Yorker who is the school’s president, said the program “focuses on craftsmanship that maintains the historic values” of the area. Her colleague Susan Burch, who worked with a transplanted Oklahoma gunsmith, Brandon Miller, to teach the course, added, “You’re looking at the intersection of art and the outdoors.”

Homicides with guns are relatively rare in the area. There have been six murders in Kalispell (population 20,000) in the past 12 years, said Roger Nasset, the local police chief. His officers are never surprised to find a gun inside a car they stop for a traffic violation – and seldom bother to discuss it, much less confiscate it. Montana’s laws on gun possession are among the least restrictive in the nation.

Guns are not permitted in schoolrooms, but have been used to raise money for them. Last fall, the Stillwater Christian School earned more than $20,000 when its parent-teacher organization held a raffle for a locally made semiautomatic AR-15 assault rifle donated by Mr. Walker, a parent of two young students there.

“When we did the fund-raiser, it didn’t cross my mind, ‘Wow, we’re donating an assault rifle to a school for a fund-raiser,'” he said. It was just, ‘This is one of the No. 1-selling rifles in America.'”

Butch Hurlbert, whose daughter and teenage granddaughter were murdered with a gun near Kalispell on Christmas Day in 2010, blames the killer — his daughter’s former boyfriend — and the police, not the gun. Having a gun, he said, “is pretty much just a normal thing.”

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DealBook: Prosecutors, Shifting Strategy, Build New Wall Street Cases

Criticized for letting Wall Street off the hook after the financial crisis, the Justice Department is building a new model for prosecuting big banks.

In a recent round of actions that shook the financial industry, the government pushed for guilty pleas, rather than just the usual fines and reforms. Prosecutors now aim to apply the approach broadly to financial fraud cases, according to officials involved in the investigations.

Lawyers for several big banks, who spoke on the condition of anonymity, said they were already adjusting their defenses and urging banks to fire employees suspected of wrongdoing in the hope of appeasing authorities.

But critics question whether the new strategy amounts to a symbolic reprimand rather than a sweeping rebuke. So far, the Justice Department has extracted guilty pleas only from remote subsidiaries of big foreign banks, a move that has inflicted reputational damage but little else.

The new strategy first materialized in recent settlements with UBS and the Royal Bank of Scotland, which were accused of manipulating interest rates to bolster profit. As part of a broader deal, the banks’ Japanese subsidiaries pleaded guilty to felony wire fraud.

The settlements present a significant shift. Authorities have long avoided guilty pleas over fears they will destroy the banks and imperil the broader economy. By going after a subsidiary, prosecutors shield the parent company from losing its license, but still send a warning to the financial industry.

The Justice Department plans to continue the campaign as it pursues guilty pleas from other bank subsidiaries suspected of reporting false interest rates, according to the prosecutors and the lawyers who requested anonymity to discuss the cases. Authorities are scrutinizing Citigroup, whose Japanese unit is suspected of rate manipulation, and prosecutors recently accused one former trader there of colluding with other banks in a vast rate-rigging conspiracy.

Prosecutors want the rate-rigging investigation to serve as a template for other financial fraud cases. Two officials, who spoke on condition of anonymity, described a plan to eventually wring an admission of guilt from an entire bank.

“This Department of Justice will continue to hold financial institutions that break the law criminally responsible,” Lanny A. Breuer, the departing head of the agency’s criminal division, said in an interview.

The strategy will face significant roadblocks.

For one, banking regulators are likely to sound alarms about the economy. HSBC avoided charges in a money laundering case last year after concerns arose that an indictment could put the bank out of business. In the first interest rate-rigging case, prosecutors briefly considered criminal charges against an arm of Barclays, but they hesitated given the bank’s cooperation and its importance to the financial system, two people close to the case said.

The Justice Department will also face resistance from Wall Street. In meetings with authorities, banks are trying to distinguish their activities from the bad behavior at UBS and Barclays, according to the industry lawyers. One lawyer who represents Deutsche Bank acknowledged that Wall Street was girding for battle over the push for guilty pleas.

Some lawyers posit that the new approach amounts to a government shakedown, because institutions may plead guilty to dodge an indictment. “I think it’s a step in the wrong direction,” said James R. Copland, the director of the Center for Legal Policy at the Manhattan Institute.

Complicating matters, lawmakers and consumer advocates will continue to complain that banks get off too easily. In the rate manipulation cases, critics have clamored for more potent penalties, seeking convictions against parent companies.

The problems “should provide motivation to prosecutors, regulators and Congress to do more to ensure that this type of behavior is stopped, and that banks and their executives who manipulate markets are held accountable,” said Senator Carl Levin, Democrat of Michigan.

Critics point to the UBS case. Before UBS signed the deal, Japanese authorities assured the bank that a guilty plea would not cost the subsidiary its license, a person involved in the case said. While the case has weighed on the stock price, the subsidiary is operating normally and clients have stayed put, according to people with direct knowledge of the case.

Prosecutors defend their effort, saying it was born from painful experiences over the last decade.

After Arthur Andersen was convicted in 2002, the accounting firm went out of business, taking 28,000 jobs with it. The Supreme Court later overturned the case, prompting the government to alter its approach.

Prosecutors then turned to deferred-prosecution agreements, which suspend charges against corporations in exchange for certain concessions and a promise to behave. But the Justice Department took heat for prosecuting few top bank executives after the financial crisis. A recent “Frontline” documentary portrayed prosecutors as Wall Street apologists.

So the government is seeking a balanced approach, aiming to hold banks accountable without shutting them down. Prosecutors consulted federal policies that required them to weigh action with “collateral consequences” like job losses. Mr. Breuer also collected input from staff, including the head of his fraud unit, Denis J. McInerney, a former defense lawyer who represented Arthur Andersen.

Mr. Breuer eventually deployed a strategy built on guilty pleas for subsidiaries. He imported the model, in part, from his foreign bribery actions and pharmaceutical cases.

“Extracting a guilty plea from a wholly owned subsidiary finally enables the Justice Department to look tough on financial institutions while sparing them from the corporate death penalty,” said Evan T. Barr, a former federal prosecutor who now defends white-collar cases as a partner at Steptoe & Johnson.

As the Arthur Andersen cases fades from memory, some prosecutors say their new approach will lay the groundwork for parent companies to plead guilty.

But first, officials say, they are testing the strategy in the interest rate-rigging case. Authorities suspect that more than a dozen banks falsified reports to influence benchmark interest rates like the London interbank offered rate, or Libor, which underpins the costs for trillions of dollars in financial products like mortgages and credit cards.

Prosecutors focused on Japanese units because e-mail traffic exposed how traders there had routinely manipulated rates to increase profits, officials say. The units also have few ties to American arms of the banks, containing any threat to the economy.

After the Barclays case, authorities shifted to UBS, given the scope of the evidence and the bank’s past brushes with authorities, according to officials. The bank’s Japanese subsidiary was also a hub of rate-rigging activity. “The Justice Department had a clear view on the past of this institution,” said one executive who met with government officials.

Along with paying $1.5 billion in fines, the bank agreed to bolster its controls and have its Japanese unit plead guilty. It was the first big global bank subsidiary to plead guilty in more than two decades.

The Royal Bank of Scotland met a similar fate. The bank’s conduct was less severe than the actions of UBS, but it too had a rogue Japanese subsidiary. The bank announced a $612 million settlement with authorities this month, including a guilty plea in Japan.

Using the settlements as a template, prosecutors are building cases against other banks ensnared in the investigation, people involved in the case said, and guilty pleas are likely. Deutsche Bank is expected to settle with authorities by late 2013, the people said.

Citigroup and JPMorgan Chase, two American banks under scrutiny, pose a thornier challenge. So far, authorities have flexed their newfound muscle with foreign banks.

American regulators may warn that extending the campaign to Citigroup would threaten the company’s stock and prompt an exodus of clients. Japan’s regulators, some feeling upstaged by the recent actions, might raise similar concerns. Citigroup’s lawyers will also push back, people involved in the case said, citing the bank’s cooperation with investigators and emphasizing that wrongdoing never reached upper levels of management. The bank fired the trader recently charged by the Justice Department.

Authorities could counter that Citigroup’s Japanese unit is a repeat offender. It butted heads with Japanese regulators three times over the last decade.

“This is hard-nosed negotiation,” said Samuel W. Buell, a former prosecutor who is now a professor at Duke Law School. “It’s a game of chicken.”

Mark Scott contributed reporting from London and Hiroko Tabuchi from Tokyo.

A version of this article appeared in print on 02/19/2013, on page B1 of the NewYork edition with the headline: Prosecutors, Shifting Strategy, Build New Wall Street Cases.

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Anti-Apartheid Leader Forms New Party in South Africa

JOHANNESBURG — Mamphela Ramphele, a respected veteran of the struggle against apartheid, announced on Monday that she had formed a new political party to compete against the governing African National Congress, calling on South Africans to “join me on a journey to build the country of our dreams.”

The party is called Agang, a Sotho word meaning “build,” said Dr. Ramphele, 65, a medical doctor who became an anti-apartheid activist and a leader of the Black Consciousness movement. In recent years, Dr. Ramphele has focused on social activism and business, serving until last week as the chairwoman of Gold Fields, a major mining firm.

The new party is the latest in a string of challengers to the dominance of the A.N.C., which has handily won every national election since apartheid ended in 1994 but has come under increasing scrutiny over charges of corruption and poor governance. In addition, inequality has grown in South Africa since the end of apartheid despite the party’s pledge to bring “A Better Life for All.” The country’s education system is in shambles.

Dr. Ramphele argued forcefully to an audience at the old Women’s Jail in Johannesburg that the government had failed to deliver, and vowed to tackle corruption head on.

“The country of our dreams has unfortunately faded,” she said in a speech. “The dream has faded for the many living in poverty and destitution in our increasingly unequal society. And perhaps worst of all, my generation has to confess to the young people of our country: we have failed you. We have failed to build for you an education and training system to prepare you for life in the 21st century.”

It is a refrain that echoes the criticisms of other opposition parties, including the Democratic Alliance, the main opposition, which was reported to have courted Dr. Ramphele, seeking to put a prominent and well-respected black leader atop what is still perceived as a largely white party despite its gains in urban black townships.

In an interview, Dr. Ramphele said she opted to start her own movement because South Africa needs a fresh start.

“The country needs a new beginning,” she said, dressed in a embroidered traditional outfit from her home state, Limpopo. “It is not going to happen with the current players.”

Dr. Ramphele has been a fixture in South African public life for decades. She had a close relationship with the Black Consciousness activist Steve Biko, who died in police custody in 1977, having two children with him. She was banished for seven years to the village of Lenyenye in a bleak northern corner of the country by the apartheid regime for her political activism. Undeterred, she started a small clinic that treated thousands of rural residents. She also earned degrees in anthropology and business.

When apartheid ended she was named Vice Chancellor of the University of Cape Town, the first black person to hold that post. She later became a managing director of the World Bank, and in recent years has been sought after as a corporate board member.

While her career has given her sterling international credentials, it remains to be seen whether she can muster a mass following in a country where populist appeal has proved essential to political success. Asked about the size of her team, she responded that “we are an energetic team of five.” Hobnobbing with corporate titans and global leaders has left Dr. Ramphele open to charges of elitism, some say.

Bantu Holomisa, leader of the United Democratic Movement, which he started after leaving the A.N.C. in 1997, said in a statement that he welcomed Dr. Ramphele to politics and signaled a willingness to join forces.

“We look forward to working with Dr. Ramphele in our efforts to build a strong political alternative for the people of South Africa,” he said.

But efforts to blunt A.N.C. dominance have struggled in the past. The Congress of the People, a breakaway party started in 2008 by supporters of former president Thabo Mbeki and other disgruntled A.N.C. members, has seen its power wane.

The A.N.C. has been rocked by scandal and tragedy over the past year. President Jacob Zuma has faced repeated investigations over $27 million in government money spent on security upgrades to his private residence in his home village of Nkandla. The police killing of 33 striking workers at a platinum mine in August 2012 caused many to question the A.N.C.’s commitment to helping the poor. The crisis led credit agencies to slash the country’s debt rating, which has hurt already slowing economic growth.

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White House Continues Work on Its Own Immigration Bill

WASHINGTON — President Obama’s chief of staff said Sunday morning that the administration has privately drafted an immigration bill so they can “be ready” with a proposal if lawmakers ultimately fail to agree on their own version of an overhaul of existing laws.

But Denis McDonough, the president’s top White House official, said Mr. Obama’s aides are continuing to work with a bipartisan group of senators despite harsh criticism Saturday night from a key Republican after a newspaper reported what it said were details of the administration’s immigration plan.

“We’ve not proposed anything to Capitol Hill yet,” Mr. McDonough said on ABC’s “This Week” in his first appearance as chief of staff. “We’re just going to be ready. We have developed each of these proposals so we have them in a position so that we can succeed.”

USA Today reported on Saturday that early drafts of the White House legislation call for immigrants to wait eight years before becoming permanent residents. The report drew a scathing response from Senator Marco Rubio, Republican of Florida, who said the plan would be “dead on arrival” in Congress.

“It’s a mistake for the White House to draft immigration legislation without seeking input from Republican members of Congress,” Mr. Rubio charged in a statement late Saturday night.

The White House has declined to confirm the paper’s report, and Mr. McDonough did not say what specific proposals are in the president’s legislation. But he said everyone will find out if lawmakers can’t reach an agreement.

“He says it’s dead on arrival if proposed?” Mr. McDonough said of Mr. Rubio’s comments. “Well, let’s make sure that it doesn’t have to be proposed, let’s make sure that that group up there, the gang of eight, makes some good progress on these efforts, as much as they say they want to. That’s exactly what we intend to do, to work with them.”

The USA Today report said that the president’s draft legislation would allow illegal immigrants to apply for a “Lawful Prospective Immigrant” visa before they became eligible for permanent resident status.

Those details are similar to the statement of principles that the White House provided to reporters after Mr. Obama’s Las Vegas speech. A fact sheet said the president wanted to strengthen border security, provide “earned citizenship,” streamline legal immigration and crack down on employers who knowingly hire illegal immigrants.

“Immigrants living here illegally must be held responsible for their actions by passing national security and criminal background checks, paying taxes and a penalty, going to the back of the line, and learning English before they can earn their citizenship,” the fact sheet said. “There will be no uncertainty about their ability to become U.S. citizens if they meet these eligibility criteria.”

In his statement, Mr. Rubio criticized Mr. Obama, saying that the details reported in the USA Today article represented legislation that “is half-baked and seriously flawed.”

“It would actually make our immigration problems worse,” he said. Mr. Rubio has been among the leading Republicans pushing for a comprehensive overhaul of immigration.

Senator Charles E. Schumer, Democrat of New York, said Sunday that Mr. Rubio is “upset” by the reports of Mr. Obama’s immigration plan. But Mr. Schumer said he remains optimistic about the chances of reaching a bipartisan agreement by sometime in March.

“We’ve talked to Senator Rubio and he’s fully on board with our process,” Mr. Schumer said on CNN’s “State of the Union,” adding that the president assured lawmakers last week that they should take the lead. “He agreed to give us the space we need to come up with a bipartisan proposal.”

But Demetrios G. Papademetriou, president of the Migration Policy Institute, an independent nonpartisan research center in Washington, said the eight-year temporary status for illegal immigrants in the document obtained by USA Today was “essentially the same as the probationary status” envisioned in a proposal developed by a bipartisan group of eight senators. During that probationary period, Mr. Papademetriou said, immigrants would have temporary visas with full work authorization.

The bipartisan Senate proposal calls for additional border security and more effective enforcement to curb illegal immigration. And it would require that “enforcement measures be complete before any immigrant on probationary status can earn a green card.” It was not immediately clear whether the White House would support such linkage.

Mr. Obama’s administration has been working on immigration legislation for years. But the issue shot to the top of the president’s second-term agenda after his re-election in November, when Hispanic voters backed him in large numbers. White House officials are betting that Republicans will be eager to embrace immigration changes as a way of repairing their image with an important voting bloc.

But getting legislation passed remains tricky, especially in the Republican-controlled House, and Mr. Obama has made it clear he will take a back seat to lawmakers if it will help. Negotiations are taking place among a bipartisan group of senators, a separate group in the House, and labor leaders and the U.S. Chamber of Commerce.

Representative Paul D. Ryan, Republican of Wisconsin, praised Mr. Obama’s tone on the issue last week, saying the president “actually doesn’t want to politicize this, which is conducive to getting something done.”

On Wednesday, the White House said Mr. Obama met with Democratic senators at the White House to get a status report on the pace of progress on the legislation. In a statement after the meeting, White House officials said the president reiterated his pledge to become more involved if necessary.

The statement said Mr. Obama told them “he expects the process to continue to move forward and stands ready to introduce his own legislation if Congress fails to act.”

It remains unclear how long the president is willing to wait. In interviews with Spanish-language television stations after his speech last month, Mr. Obama suggested that he wanted to see real progress by March, when lawmakers had said they hoped to have reached an agreement.

“If they can get a piece of legislation debated on the floor by March I think that’s a good timeline. And I think that can be accomplished,” he said on Univision last month. “I’m not going to lay down a particular date because I want to give them a little bit of room to debate. If it slips a week, that’s one thing. If it starts slipping three months, that’s a problem.”

Robert Pear contributed reporting.

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DealBook: Confidence on Upswing, Mergers Make Comeback

The mega-merger is back.

For the corporate takeover business, the last half-decade was a fallow period. Wall Street deal makers and chief executives, brought low by the global financial crisis, lacked the confidence to strike the audacious multibillion-dollar acquisitions that had defined previous market booms.

Cycles, however, turn, and in the opening weeks of 2013, merger activity has suddenly roared back to life. On Thursday, Berkshire Hathaway, the conglomerate run by Warren E. Buffett, said it had teamed up with Brazilian investors to buy the ketchup maker H. J. Heinz for about $23 billion. And American Airlines and US Airways agreed to merge in a deal valued at $11 billion.

Those transactions come a week after a planned $24 billion buyout of the computer company Dell by its founder, Michael S. Dell, and private equity backers. And Liberty Global, the company controlled by the billionaire media magnate John C. Malone, struck a $16 billion deal to buy the British cable business Virgin Media.

“Since the crisis, one by one, the stars came into alignment, and it was only a matter of time before you had a week like we just had,” said James B. Lee Jr., the vice chairman of JPMorgan Chase.

Still, bankers and lawyers remain circumspect, warning that it is still too early to declare a mergers-and-acquisitions boom like those during the junk bond craze of 1989, the dot-com bubble of 1999 and the leveraged buyout bonanza of 2007. They also say that it is important to pay heed to the excesses that developed during these moments of merger mania, which all ended badly.

A confluence of factors has driven the recent deals. Most visibly, the stock market has been on a tear, with the Standard & Poor’s 500-stock index this week briefly hitting its highest levels since November 2007. Higher share prices have buoyed the confidence of chief executives, who now, instead of retrenching, are looking for ways to expand their businesses.

A number of clouds that hovered over the markets last year have also been removed, eliminating the uncertainty that hampered deal making. Mergers and acquisitions activity in 2012 remained tepid as companies took a wait-and-see approach over the outcome of the presidential election and negotiations over the fiscal cliff. The problems in Europe, which began in earnest in 2011, shut down a lot of potential transactions, but the region has since stabilized.

“When we talk to our corporate clients as well as the bankers, we keep hearing them talk about increased confidence,” said John A. Bick, a partner at the law firm Davis Polk & Wardwell, who advised Heinz on its acquisition by Mr. Buffett and his partners.

Mr. Bick said that mega-mergers had a psychological component, meaning that once transactions start happening, chief executives do not want to be left behind. “In the same way that success breeds success, deals breed more deals,” he said.

A central reason for the return of big transactions is the mountain of cash on corporate balance sheets. After the financial crisis, companies hunkered down, laying off employees and cutting costs. As a result, they generated savings. Today, corporations in the S.& P. 500 are sitting on more than $1 trillion in cash. With interest rates near zero, that money is earning very little in bank accounts, so executives are looking to put it to work by acquiring businesses.

The private equity deal-making machine is also revving up again. The world’s largest buyout firms have hundreds of billions of dollars of “dry powder” — money allotted to deals in Wall Street parlance — and they are on the hunt. The proposed leveraged buyout of Dell, led by Mr. Dell and the investment firm Silver Lake Partners, was the largest private equity transaction since July 2007, when the Blackstone Group acquired the hotel chain Hilton Worldwide for $26 billion just as the credit markets were seizing up.

But perhaps the single biggest factor driving the return of corporate takeovers is the banking system’s renewed health. Corporations often rely on bank loans for financing acquisitions, and the ability of private equity firms to strike multibillion-dollar transactions depends on the willingness of banks to lend them money.

For years, banks, saddled by the toxic mortgage assets weighing on their balance sheets, turned off the lending spigot. But with the housing crisis in the rearview mirror and economic conditions slowly improving, banks are again lining up to provide corporate loans at record-low interest rates to finance acquisitions.

The banks, of course, are major beneficiaries of megadeals, earning big fees from both advising on the transactions and lending money to finance them. Mergers and acquisitions in the United States total $158.7 billion so far this year, according to Thomson Reuters data, more than double the amount in the same period last year. JPMorgan, for example, has benefited from the surge, advising on four big deals in recent weeks, including the Dell bid and Comcast’s $16.7 billion offer for the rest of NBCUniversal that it did not already own.

Mr. Buffett, in a television interview last month, declared that the banks had repaired their businesses and no longer posed a threat to the economy. “The capital ratios are huge, the excesses on the asset aside have been largely cleared out,” said Mr. Buffett, whose acquisition of Heinz will be his second-largest acquisition, behind his $35.9 billion purchase of a majority stake in the railroad company Burlington Northern Santa Fe in 2009.

While Wall Street has an air of giddiness over the year’s start, most deal makers temper their comments about the current environment with warnings about undisciplined behavior like overpaying for deals and borrowing too much to pay for them.

Though private equity firms were battered by the financial crisis, they made it through the downturn on relatively solid ground. Many of their megadeals, like Hilton, looked destined for bankruptcy after the markets collapsed, but they have since recovered. The deals have benefited from an improving economy, as well as robust lending markets that allowed companies to push back the large amounts of debt that were to have come due in the next few years.

But there are still plenty of cautionary tales about the consequences of overpriced, overleveraged takeovers. Consider Energy Future Holdings, the biggest private equity deal in history. Struck at the peak of the merger boom in October 2007, the company has suffered from low natural gas prices and too much debt, and could be forced to restructure this year. Its owners, a group led by Kohlberg Kravis Roberts and TPG, are likely to lose billions.

Even Mr. Buffett made a mistake on Energy Future Holdings, having invested $2 billion in the company’s bonds. He admitted to shareholders last year that the investment was a blunder and would most likely be wiped out.

“In tennis parlance,” Mr. Buffett wrote, “this was a major unforced error.”

Michael J. de la Merced contributed reporting.

A version of this article appeared in print on 02/15/2013, on page A1 of the NewYork edition with the headline: Confidence on Upswing, Mergers Make Comeback.

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DealBook: Berkshire and 3G Capital to Buy Heinz for $23 Billion

10:12 a.m. | Updated

Warren E. Buffett has found another American icon worth buying: H. J. Heinz.

Berkshire Hathaway, the giant conglomerate that Mr. Buffett runs, said on Thursday that it would buy the food giant for about $23 billion, adding Heinz ketchup to its stable of prominent brands.

The proposed acquisition, coming fast on the heels of a planned $24 billion buyout of the computer maker Dell and a number of smaller deals, heralds a possible reemergence in merger activity.  The number of deals and the prices being paid for companies are still a far cry from the lofty heights of the boom before the financial crisis.  But an improving stock market, growing confidence among business executives and mounting piles of cash held by corporations and private equity funds all favor a return to deal-making. 

Mr. Buffett is teaming up with 3G Capital Management, a Brazilian-backed investment firm that owns a majority stake in a company whose business is complementary to Heinz’s: Burger King.

Under the terms of the deal, Berkshire and 3G will pay $72.50 a share, about 20 percent above Heinz’s closing price on Wednesday. Including debt, the transaction is valued at $28 billion.

“This is my kind of deal and my kind of partner,” Mr. Buffett told CNBC on Thursday. “Heinz is our kind of company with fantastic brands.”

In many ways, Heinz fits Mr. Buffett’s deal criteria almost to a T. It has broad brand recognition – besides ketchup, it owns Ore-Ida and Lea & Perrins Worcestershire sauce – and has performed well. Over the last 12 months, its stock has risen nearly 17 percent.

Mr. Buffett told CNBC that he had a file on Heinz dating back to 1980. But the genesis of Thursday’s deal actually lies with 3G, an investment firm backed by several wealthy Brazilian families, according to a person with direct knowledge of the matter.

One of the firm’s principal backers, Jorge Paulo Lemann, brought the idea of buying Heinz to Berkshire about two months ago, this person said. Mr. Buffett agreed, and the two sides approached Heinz’s chief executive, William R. Johnson, about buying the company.

“We look forward to partnering with Berkshire Hathaway and 3G Capital, both greatly respected investors, in what will be an exciting new chapter in the history of Heinz,” Mr. Johnson said in a statement.

Berkshire and 3G will each contribute about $4 billion in cash to pay for the deal, with Berkshire also paying $8 billion for preferred shares. The rest of the cost will be covered by debt financing raised by JPMorgan Chase and Wells Fargo.

Mr. Buffett told CNBC that 3G would be the primary supervisor of Heinz’s operations, saying, “Heinz will be 3G’s baby.”

The food company’s headquarters will remain in Pittsburgh, Heinz’s home for over 120 years.

Heinz’s stock was up nearly 20 percent in morning trading, at $72.51, closely mirroring the offered price. Berkshire’s class A stock was also up slightly, rising 0.64 percent to $148,691 a share.

Heinz was advised by Centerview Partners, Bank of America Merrill Lynch and the law firm Davis Polk & Wardwell. A transaction committee of the company’s board was advised by Moelis & Company and Wachtell, Lipton, Rosen & Katz.

Berkshire’s and 3G’s lead adviser was Lazard, with JPMorgan and Wells Fargo providing additional advice. Kirkland & Ellis provided legal advice to 3G, while Berkshire relied on its usual law firm, Munger, Tolles & Olson.

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DealBook: Big Banks Are Told to Review Their Own Foreclosures

Washington is seeking help from an unlikely group in its effort to distribute billions of dollars to struggling homeowners in foreclosure: the same banks accused of abusing homeowners with shoddy foreclosure practices.

In doing so, the regulators are trying to speed the process after a flawed, independent foreclosure review delayed relief for millions of borrowers, according to people briefed on the matter. But housing advocates worry that the banks, eager to end the costly process, could take shortcuts as they comb through loan files for potential errors, in some cases diverting aid from the neediest homeowners.

Regulators say they will check the work. And banks have already agreed to pay a fixed amount to troubled homeowners, creating another backstop.

According to officials involved in the process, who spoke anonymously because the matter is not public, the regulators had few alternatives.

Last month, the Office of the Comptroller of the Currency scuttled the foreclosure review by independent consultants because it was marred by delays and inefficiency. Instead, the regulator struck a multibillion-dollar settlement directly with the nation’s largest banks, a deal that includes $3.6 billion in payments to aggrieved homeowners.

To accelerate the payments, the comptroller’s office decided to cut out the middlemen, the consultants, from the reviews. In a conference call last week, the government outlined a plan to use the lenders instead, according to people with direct knowledge of the discussion. Banks will now have to assess each loan for potential errors, which will help determine the size of the payments to homeowners.

The decision to tap the banks for support is the latest twist in the review of more than four million foreclosures, a process that has incensed lawmakers and ensnared the nation’s largest lenders. Regulators are eager to make the payments to homeowners, who have languished for more than a year.

In 2012, housing advocates, regulators and some bank executives suggested the government release an initial round of payments to homeowners, people briefed on the matter said. Such a move might have quelled suspicions among homeowners that the independent review was an empty promise, or worse, a fraud. But the effort went nowhere.

Now, the first payments to homeowners are not expected until late March.

For Judie Lee, 51, a paralegal who is battling to save her three-bedroom home in Lynn, Mass., it might not come in time. Ms. Lee says she submitted a request for aid more than six months ago after a series of botched loan modifications.

“We are in trouble,” said Ms. Lee, who said that she fell behind on her loan payments after losing a job in 2007.

Under the plan outlined last week, the banks will pore over loan files like Ms. Lee’s to identify the worst possible errors. Military personnel illegally foreclosed on, for example, will rank highest on the list. Borrowers who might be current on their loan payments — and therefore did not warrant a foreclosure — will be next.

Regulators will then decide how much money to pay each category of borrower. The worse the errors, the bigger the payout.

The plan, regulators say, offers a more equitable way to divide the money than paying the same amount to each homeowner.

The strategy, though, presents potential conflicts of interests. The banks, in haste to meet tight deadlines, could fail to provide an accurate portrayal of what went wrong. The loan files are also in disarray, officials say, complicating the task for banks.

“The whole process has been a slap in the face to homeowners and a slap on the wrist to banks,” said Isaac Simon Hodes, an organizer with the community group Lynn United for Change. “The latest development shows how there has been no accountability.”

Regulators say the lenders have no incentive to manipulate the reviews. Under the settlement, the banks committed to dole out a set amount. Bank of America must distribute $1.1 billion to homeowners. Wells Fargo owes more than $700 million. The costs will not change, regardless of what the banks find in the loan files in the coming weeks.

The Office of the Comptroller of the Currency, which is running the review, also said it would perform regular checks on the banks’ work and make sure they adopt controls to prevent errors.

“Regulators will verify and test the work of servicers to slot borrowers into broad categories and then regulators will determine the amount of payment for each category,” explained Morris Morgan, the deputy comptroller in charge of supervising large banks.

By relying on the banks, regulators can part ways with the consultants.

Despite billing for roughly $2 billion in fees in the 14-month review, consultants examined only a sliver of the 500,000 complaints filed by homeowners, people involved in the matter said. Their efforts were stymied, in part, because regulators urged consultants to first scrutinize a random sample of the four million foreclosures before digging into specific homeowner complaints, the people involved said. The decision, the people said, may have undercut the scope of the settlement and potentially deprived homeowners of additional relief.

Consultants were also criticized for a faulty review process.

Some consulting firms, including the Promontory Financial Group, farmed out much of the work to contract employees. Others faced questions about their objectivity. The consultants, critics note, were paid billions of dollars by the same banks they were expected to police.

Some consultants say they sounded repeated alarms about the process. Last spring, a group of consulting firm executives met with comptroller officials in Washington to voice concerns that the reviews were too narrow, according to people with direct knowledge of the meetings.

Other people close to the review say consultants were only partly to blame for the problem. The review process, with its narrow focus, was created by the comptroller’s office in 2011, under previous leadership.

Now, some consultants feel spurned by the regulators’ decision to hand off the review.

“Why did you not trust the banks a month ago?” asked one consultant who spoke anonymously for fear of offending regulators. “And why do you solely rely on them now?”

A version of this article appeared in print on 02/13/2013, on page B1 of the NewYork edition with the headline: Banks Told To Review Their Own Foreclosures.

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Obama to Announce Troops’ Return

WASHINGTON — President Obama plans to announce in his State of Union address on Tuesday night that half of the 66,000 American troops in Afghanistan will be home by this time next year, according to an administration official familiar with the speech.

The decision by Mr. Obama represents a careful balancing of political interests and military requirements. The announcement enables him to say that slightly more than half of the American force — 34,000 troops — will be out of Afghanistan by next February, keeping on track a plan to hand over security responsibility to Afghan troops by the end of 2014.

But the plan also gives the military commanders in Afghanistan the flexibility they have long sought in determining the pace of the reductions. Under the phased withdrawal, this official said, commanders will have a “robust force” for the next fighting season, which ends in September and October.

The commanders want to hold on to sufficient forces — including troops, airpower and medical evacuation units — to support the Afghan troops during this transition. They also want to try to consolidate military gains before rapidly drawing down American forces.

At the same time, the official said, the pace of the drawdown will be rapid enough that it will prod Afghan forces to take on greater responsibility for securing the country. The danger of leaving too many American troops for too long, he said, is that the security situation could “go off a cliff” after the United States largely withdraws.

Afghan troops are scheduled to move into a lead role this spring, under an accelerated transition of security responsibility that Mr. Obama announced when President Hamid Karzai of Afghanistan visited Washington last month. Mr. Obama planned to call Mr. Karzai later on Tuesday morning to inform him of the planned announcement.

The president, an official said, will make no announcement about how many forces the United States should keep in Afghanistan after 2014 when the security mission is entirely the responsibility of the Afghans. Mr. Obama, he said, has not yet made a decision on that.

White House officials did not provide a detailed timetable for withdrawal this year, saying only that it would be “phased.”

But one American official, who asked not to be identified, said that he expected the number to come down to about 60,000 troops this spring. That force would remain through the fighting season after which there would be a steep drop to about 32,000 by this time next year.

Mr. Obama’s reference to Afghanistan will be one of relatively few nods to national security in the State of the Union address. The official said he would refer briefly to North Korea, which American and South Korean officials said tested a nuclear weapon on earlier on Tuesday.

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