According to sources inside the room, President Obama just played peacemaker in a spat between French President Nicolas Sarkozy and Hu Jintao, President of the People’s Republic of China.
In the finaly plenary session among the G-20 leaders, Sarkozy and Hu were having a heated disagreement about tax havens.
France and other European nations have been pushing for rules and regulations to apply to various tax havens; Germany’s Finance Minister Peer Steinbrueck has said "these tax havens are also places where unregulated financial market deals are made."
But Chinese leaders fear a crackdown would hurt banking centers in Macao, Shanghai and Hong Kong. Other countries agree, though they are less outspoken publicly.
The exchange between Sarkozy and Hu got so heated, said a source — who is not a member of the Obama administration — it was threatening the unity of the G-20 leaders’ meeting.
"They were going through the revised draft," a senior Obama administration official said.
The issue: Sarko wanted "a list of non-compliant jurisdictions," tones that allow tax havens, he senior official said. "Other countries wanted it too, but (Sarkozy) was the most outspoken."
Sarkozy specifically was pushing for a list from the Organisation for Economic Co-operation and Development (OECD) to be included in the G-20 Leaders’ Statement.
Headquartered in Paris, the OECD has 30 member countries — all capitalist democracies.
China opposed any such list being included in the final Leaders’ Statement.
"China tends to have a problem endorsing the documents of organizations like the OECD that they’re not a party to," the senior administration official said.
But Mr. Obama, according to this account, stepped between the two men, urging them to try to find consensus, and giving them a "pep talk" about the importance of working together.
The senior adminstration official said that Mr. Obama pulled Mr. Sarkozy aside, took him to a corner, "and discussed possible alternatives," the senior official said.
Once they arrived at one, President Obama "sent a message to the Chinese" that a counter-offer was on the table. The Chinese spent some time considering the offer. But they took a few minutes.
So Mr. Obama, with the assistance of translators, suggested that he and Mr. Hu have a conversation as well. They, too went to the corner to talk. After a few minutes, Mr. Obama called upon Mr. Sarkozy to join them.
"Translators and sherpas in tow, they reached an agreement," the official said. "There was a multiple shaking of hands."
The agreement: the final G-20 document would state that the G-20 nations "stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over. We note that the OECD has today published a list of countries assessed by the Global Forum against the international standard for exchange of tax information."
The Obama administration official described this compromise as a "meeting in the middle." The word "note" — as in "we note the OECD has today published a list" — doesn’t necessarily carry any weight.
Moreover, any sanctions are "future-oriented," the senior official said, meaning there are as of now no actual sanctions.
The OECD also has yet to publish any such list, though Obama adminstration officials said the organization would do so today.
Soon after Mr. Obama helped to resolve the problem, British Prime Minister Gordon Brown announced that "we have agreed to tough standards for those (tax shelters) who don’t come into line in the future," which seems to overstate the case.
"I’d suggest we’d still be in there had he not done this," the senior Obama administration official said.