Actually the US had already approved the construction in Jerusalem

Here's another Ha'aretznik's take on the Netanyahu/Biden spit, woops, I mean spat. This is from Gideon Levy:

The scoundrel appeared in the midst of the smile- and hug-fest with the vice president of the United States and disrupted the celebration. Joe Biden's white-toothed smiles froze abruptly, the great friendship was about to disintegrate, and even the dinner with the prime minister and his wife was almost canceled, along with the entire "peace process." And all because of Yishai.

Well, the interior minister does deserve our modest thanks. The move was perfect. The timing, which everyone is complaining about, was brilliant. It was exactly the time to call a spade a spade. As always, we need Yishai (and occasionally Avigdor Lieberman) to expose our true face, without the mask and lies, and play the enfant terrible who shouts that the emperor has no clothes.

For the emperor indeed has no clothes. Thank you, Yishai, for exposing it. Thank you for ripping the disguise off the revelers in the great ongoing peace-process masquerade in which nobody means anything or believes in anything.

What do we want from Yishai? To know when the Jerusalem planning committee convenes? To postpone its meeting by two weeks? What for? Hadn't the prime minister announced to Israel, the world and the United States, in a move seen at the time as a great Israeli victory, that the construction freeze in the settlements does not include Jerusalem? [My emphasis] Then why blame that lowly official, the interior minister, who implemented that policy?

What's the big deal? Another 1,600 apartments for ultra-Orthodox Jews on occupied, stolen land? Jerusalem won't ever be divided, Benjamin Netanyahu promised, in another applause-winning move. In that case, why not build in it? The Americans have agreed to all this, so they have no reason to pretend to be insulted.[same again]

And yet according to The Guardian, Obama was ""incandescent with anger" and according to the Washington Post:

Secretary of State Hillary Rodham Clinton warned Israeli Prime Minister Binyamin Netanyahu on Friday that Israel had sent a "deeply negative signal" about the U.S.-Israeli relationship and urged him to take immediate steps to demonstrate it was interested in renewing efforts at a Middle East peace agreement

I don't know, the games people play....(to be continued forever)