In win for Big Oil, U.S. proposes biofuel mandate cut

Source: BY TIMOTHY GARDNER, Reuters • Posted: Monday, November 18, 2013

(Reuters) – The Obama administration proposed on Friday slashing federal requirements for U.S. biofuel use in 2014, bowing to pressure from the petroleum industry and attempting to prevent a potential fuel crunch next year.

It was the first cut to renewable fuel targets written into a 2007 law, and seen as a clear win for oil refiners and a loss for biofuel producers. It followed a prolonged lobbying blitz on both sides of the issue.

The plan follows the Environmental Protection Agency’s warnings that the country was approaching a point where the so-called Renewable Fuel Standard (RFS) would require the use of more ethanol than can be blended into gasoline at the 10 percent level that dominates the U.S. fueling infrastructure.

Refiners have said this “blend wall,” if left in place, would force them to export more fuel or produce less gasoline, leading to shortages and higher prices at the pump.

In response, the EPA proposed to cut overall use of renewable fuels, made mostly from U.S. corn and to a lesser extent from soybeans, grasses, crop waste and Brazilian sugarcane, to a range of 15 billion to 15.52 billion gallons.

Within that range, the agency proposed a specific goal of 15.21 billion gallons, which is more than 16 percent less than the 18.15 billion gallons contained in the law that governs the RFS, and below this year’s 16.55 billion gallons.

The proposed goal matches the number contained in a draft that was leaked and circulated in October.

U.S. gasoline demand had been expected to rise every year when Congress passed the law in 2007, but it peaked in 2008 and has been anemic since, partly because fuel efficiency of U.S. cars and light trucks has risen steadily.

“This unanticipated reduction in fuel consumption brings us to the point where the realities of the fuel market must be addressed to properly implement the program,” a senior administration official told reporters in a teleconference about the proposal.

The impending blend wall problem had led to a surge in prices for ethanol credits, known as renewable identification numbers or RINs, from a few cents a year ago to almost $1.50 at midyear.

The surge had threatened to push up gasoline prices as the extra RINS costs for refiners would have been passed on to consumers

RINS prices have subsided in recent months, propelled lower in part by confidence that the 2014 mandate would be tweaked. After the EPA proposal on Friday, RINs prices fell about 7 cents to 18 cents.

The proposal still falls short of a request from two major oil and gas trade groups to lower the 2014 renewable fuel use target to 14.8 billion gallons.

The plan cuts the 2014 use of advanced biofuel, including biodiesel made from soybeans and Brazilian ethanol from sugarcane, to a range of 2.0 billion to 2.51 billion gallons.

The agency did not propose a specific 2014 volume for ethanol made from corn.

But the proposed change in advanced biofuels implies a corn ethanol mandate of 12.7 billion to 13.2 billion gallons, down from the previous 2014 mandate of 14.4 billion gallons.

“We are astounded by the proposal released by the Administration today. It reflects an ‘all of the above, except biofuels’ energy strategy,” said Fuels America, a coalition of alternative energy producers.

The group termed the blend wall a fictional narrative, “created by the oil industry to stifle competition.”

Their view was echoed by Senator Debbie Stabenow, a Michigan Democrat and chairwoman of the Senate Agriculture Committee, who said in a statement that the new biofuel targets would “mean less competition at the pump.”

The EPA expects to release a final rule next spring after a 60-day public comment period. After that ethanol backers could unleash legal challenges to soften or reverse the changes.

“These groups will likely argue that EPA may not lower the standards if it can be shown that renewable fuel producers can produce enough renewable fuel to meet the mandates,” said analysts at the law firm Sutherland Asbill and Brennan LLP.


Biofuels stocks were mixed following the announcement. The shares of ethanol maker Pacific Ethanol Inc, closed up 14.4 percent at $2.78, and isobutanol maker GEVO Inc, up 26 percent at $1.74, were among the gainers.

Biodiesel maker Renewable Energy Group Inc’s stock was down 6 percent at $13.38, while ethanol producer Green Plains Renewable Energy closed down 1 percent at $15.81.

Chicago corn futures fell to new lows for the day, down 1.1 percent at $4.21-3/4 per bushel, although the impact was muted because Friday’s announcement was similar to the leaked proposal from October. Prices this month hit their lowest point in more than three years. The price of soybeans, used to make biodiesel, dropped 2.5 percent.

Biofuels backers were livid at the announcement.

A representative for Archer Daniels Midland Co, one of the largest ethanol producers, said companies had invested in renewable fuel projects “on the basis of firm legislative commitments” and across two presidential administrations, Presidents Barack Obama and George W. Bush

ADM shares fell on news of the mandate, ending down 3.4 percent on the New York Stock Exchange at $40.56.

A lower mandate to produce corn-based ethanol could cost grain growers at the farm gate. Livestock producers, by contrast, were jubilant at the prospect of lower feed prices, but called on lawmakers to do more.

“Congressional action to repeal the RFS remains the most viable pathway to allowing all users of corn to have equal standing in the marketplace,” the National Chicken Council said in a statement.


It speaks volumes that the first known political use of the term “cabinet” in English, by Sir Francis Bacon in 1607, was pejorative. Bacon noted with disdain that some Italian and French rulers had introduced standing “cabinet counsels,” so named for the small, private rooms in which they met. These he dismissed as “a remedy worse than the disease,” in part because they contributed to “the revealing of affairs, whereby they become less secret.”

In 1789, President George Washington organized the first American Cabinet, including the attorney general and the heads of State, Treasury and War—the departments that still matter most. Some 40 years later, Andrew Jackson realized his group was “less secret” than it needed to be, so he relied on a shadowy “kitchen cabinet” of unofficial advisers. It’s no accident that the golden age of the Cabinet came in the midst of the Civil War, when the crisis led Abraham Lincoln to empower seven Cabinet members to rule with near-dictatorial authority on matters of public safety.

By 1939, Franklin Roosevelt had coaxed Congress into creating the executive office of the president, allowing him to hire hundreds of Brain Trusters to circumvent a sluggish Cabinet overwhelmed by the Depression. Then came the chief of staff, a post officially named in 1961 for the West Wing’s de facto chief operating officer. John F. Kennedy and Lyndon Johnson still had consequential individuals in their Cabinets—Attorney General Robert F. Kennedy was practically his brother’s co-president—but by the late 1960s the institution was well on its way to becoming a hood ornament.

Yet the Cabinet has also remained a sort of funhouse mirror, magnifying a president’s managerial strengths and weaknesses. Richard Nixon isolated himself, abused and bullied Cabinet secretaries, and then, after a few highballs, blamed everybody for disloyalty. Bill Clinton crowdsourced his Cabinet before that was even a word, calling secretaries like Reich at odd hours with odd questions and setting aides against one another in a mock court, where decisions were as often deferred as made. George W. Bush, the first MBA to serve in the Oval Office, promised to restructure and streamline the presidency, but he found his Cabinet mired in bickering and infighting in the years after the Sept. 11 attacks. All too often, the only adviser who mattered was Vice President Dick Cheney.

Obama intended to be different, instructing John Podesta—the former Clinton chief of staff he recruited to help line up his inaugural Cabinet—and his other headhunters to think “team of rivals” big. At one point, he was considering extending offers to not one but three former Democratic presidential hopefuls: In addition to courting Hillary Clinton for secretary of state (a job she accepted to the surprise of Obama’s inner circle as well as her own), he sounded out 2004 Democratic nominee John Kerry for a variety of possible posts and even offered former Vice President Al Gore first crack at being his environment czar. (Gore declined.)

But as the United States fell deeper into full-fledged recession, Obama diverted his attention to assembling a crisis team to deal with the crumbling economy. Soon after his team was in place, he had the management epiphany every president experiences during his first weeks in power: He was drowning in data and chicken-pecked by aides asking for input. He privately groused that Emanuel was overwhelming him with requests to make decisions, so he issued a standing order to Emanuel and all future chiefs of staff, one of them told me: “Cut down on the number of decisions I have to make.”

At the same time, the constitutional law professor in Obama was driven by his disdain for what he saw as abuses of executive power under Bush and Cheney. One incident in particular haunted Obama: the attempt by top Bush aides to extract, from a barely conscious Attorney General John Ashcroft, hospital-bed approval for extending warrantless wiretapping. So while Obama may not have empowered his Cabinet, he bent over backward to avoid the appearance he was coercing them.

Reflecting that desire, just about every Obama Cabinet member received a no-meddling pledge from the president himself. As he told Arne Duncan, a basketball buddy who became his education secretary, “Don’t worry about the politics. Do what you think is right. … I’ll handle the politics.”


June 10, 2010 (left): President Obama leads a meeting in the Cabinet Room. Nov. 14, 2009 (right): Obama aboard Air Force One with staff members, including press secretary Robert Gibbs and senior advisers Valerie Jarrett and David Axlerod. | Pete Souza/White House

But not worrying about the politics is never an option in Washington, as Attorney General Eric Holder and the rest of the Cabinet soon found out. In February 2009, in the depths of the financial crisis, a time when Obama didn’t need any distractions, Holder, the highest-profile African-American in Obama’s Cabinet, told an audience of Justice Department employees, “In things racial we have always been and continue to be, in too many ways, essentially a nation of cowards.”


Obama might have promised not to meddle with his Cabinet secretaries, but politics was no side issue for his top advisers—David Plouffe, David Axelrod, Gibbs and Emanuel—who knew full well that it wasn’t a good idea to have one of the most visible Cabinet members out there expressing his innermost thoughts on sensitive racial issues. In fact, Obama’s political guys had been skeptical of Holder’s appointment from the beginning, quietly backing Arizona Gov. Janet Napolitano over the easygoing career prosecutor, whom they considered unimpressive in vetting interviews. But they were blocked by the president-elect and his senior adviser Valerie Jarrett, the Obamas’ Chicago friend and mentor who didn’t seriously consider any candidate besides Holder. Jarrett has had an all-access pass to the first family, a back channel to Obama unlike any other adviser, and she soon earned the sobriquet “Eric’s appeals court.”

Sure enough, the “cowards” speech set off a political firestorm just as Obama was trying to sell a skeptical country on his massive $787 billion stimulus package for the battered economy. Emanuel was especially infuriated and let Holder know personally during an exchange that included a fair share of Emanuel’s patented F-bombs. An Emanuel spokesperson said the former chief of staff has no specific recollection of the incident but added that Emanuel and Holder “weren’t shy” with each other.


May 5, 2012: Staffers David Axlerod, David Plouffe and Jim Messina at a D.C. campaign event. | Stephen Crowley/The New York Times/Redux

Soon, Axelrod, Emanuel and Gibbs moved to install a couple of handpicked staffers in Holder’s office in order to monitor policy and edit his public utterances. Holder, furious, rejected the plan and, in a pattern that would often repeat itself, successfully prevailed on Obama personally to let him run his own department, according to several people with knowledge of the situation. He told the president that “he didn’t intend to be treated like a child,” one of them told me. Bigger battles were to come—Holder would soon clash again with Emanuel in an unsuccessful bid to divert high-profile terrorism trials from military tribunals to civilian courts, for example—and, each time, the attorney general availed himself of unique access to the president, even during family dinners or holidays in the White House residence. At least once, Holder took the unusual step of dialing Obama on Air Force One to litigate a dispute with Emanuel.

It was one way to circumvent the built-in supremacy of Emanuel and the West Wing staff, but most of the Cabinet had no such recourse.


Plouffe, meanwhile, had had enough after the Holder and Chu incidents, telling other members of the political team that the Cabinet needed to be out on the “shortest leash possible.” But there simply weren’t enough hands to hold all the leashes. Emanuel asked Stephanie Cutter, a former aide to Massachusetts Democratic Sen. Ted Kennedy, to head the historically toothless Cabinet affairs office. No way, she said—she specialized in thankless jobs, but this was too much.

Still, the smaller dogs proved easier to muzzle. “The sense was these people, for the most part, couldn’t be trusted,” a senior 2008 Obama campaign aide says. “It wasn’t really their fault, when you think about it. But you had to make a risk-reward calculation. There might have been a small upside in having [Agriculture Secretary] Tom Vilsack out there in Iowa, but there would be a huge downside if someone said something stupid … and you didn’t want to be the guy giving them a green light.”

West Wing staff tended to rank the second-tier secretaries by the frequency and lethality of their gaffes, regardless of their policy chops or potential as surrogates. One afternoon, when the team was dumping on Commerce Secretary Gary Locke, Emanuel exploded, shouting, “It’s our fault! We haven’t done anything to train these guys!” Nothing much changed, however, and the gap kept growing between the second-class Cabinet and the powerful White House policy “czars,” who had free rein to concoct plans and present them to the president directly.

Cabinet members quickly realized that complaining wasn’t a great idea. Determined to make something out of his Commerce perch, Locke pressed to be admitted to the big economic team meetings where all the key decisions were made by the West Wing’s A-team players. He attended a few, but did little to impress Obama or his team, and was eventually shipped off to Beijing as ambassador to China. “He was never heard from again,” recalls a former member of the economic team.


A handful of Cabinet officials did play significant roles, at least early on, but they tended to be the ones adept at the inside game, the secretaries with staffers’ chops. Ray LaHood, a former Republican congressman from Illinois, was deployed to lobby his ex-colleagues on Capitol Hill and act as a regular-guy surrogate charged with selling the stimulus to Middle America. (“I’m not going to be one of those people who is ever going to whine about the fact that they didn’t pay enough attention to me,” LaHood told me. “I thought that was a pretty good thing that they weren’t micromanaging my department, so I just went out and did my job.”) At the Education Department, Arne Duncan leveraged his personal relationship with Obama to replace outdated No Child Left Behind guidelines—even if he privately complained that it took forever to get anything done internally, according to several administration officials.


I asked Duncan to identify the most important moment at a Cabinet meeting he’d attended. Tellingly, he seized on a personal, not policy, moment. “It’s a surreal experience sitting there with Bob Gates and Hillary Clinton and Leon Panetta—world-class leaders,” he said. “That hasn’t sort of gone away. It’s like, do I really belong here?”


The informal rule about Cabinet meetings was that no one was to divulge what happened, but not much was worth keeping under wraps. Shortly after the Osama bin Laden raid in 2011, Obama summoned the Cabinet for an exultant briefing from Gates, who gave them barely more than the CNN account—“not top, but mostly, sorta secret,” joked one participant. Occasionally, a well-meaning Cabinet secretary tried to transact serious business, only to be reminded that it was neither the time nor the place. In 2010, when Shaun Donovan, the boyish housing and urban development secretary and an Obama favorite, offered handouts about a complicated housing subsidy program, Obama jabbed, half-joking, “Oh, Shaun, I see you were that kid in school.” Emanuel quickly added, “Maybe I’ll take his lunch money.”


By 2011, Emanuel had stepped aside and was replaced as chief of staff by Bill Daley, the brother of the Chicago mayor Emanuel would succeed. Daley had served in Bill Clinton’s Cabinet as commerce secretary. But he would last only one year with Obama.


With Plouffe’s support, Daley was working on an ambitious proposal to consolidate several Cabinet departments—potentially including Energy, Interior and the Environmental Protection Agency—into an über-Department of Natural Resources. It piqued Obama’s interest, but the idea never even made it to the planning stages. As a trial balloon, Daley pushed a merger to fold Commerce, the office of the U.S. Trade Representative and several smaller agencies into a new Department of Business. It hit a brick wall in Montana Democratic Sen. Max Baucus, who viewed the reform as an intrusion on the Hill’s oversight authority that would create another “bureaucratic behemoth.” (The proposal came back a few days before the 2012 election, long after Daley had departed, when Obama needed a talking point to rebut Republican challenger Mitt Romney’s charge that Obama was bad for business. It hasn’t been mentioned since.)



Jan. 17, 2012: Obama and Bill Daley meet with business leaders at the White House. | Chip Somodevilla/Getty Images

Yet even Daley eventually succumbed to the West Wing view that a Cabinet was something to be tightly controlled. At the height of the Occupy Wall Street movement in early 2012, Interior Secretary Ken Salazar OK’d U.S. Park Police plans to expel protesters from a pair of federally owned parks not far from the White House. When Daley learned on local TV of the plan to raid the parks, he called the interior secretary’s cellphone. “Cut that out now! Make them stop! You’re going to cause a shitstorm,” yelled Daley.


Salazar played a trump card every Cabinet member, however far down the org chart, carries: the power to drag the president into the story, backed by the implied threat to resign in protest. “Bill,” Salazar said, “if the president wants me to do this, he needs to call me directly and ask.” Daley hung up. Obama never called.




Since George Washington’s day, most Cabinet hierarchies haven’t been much of a mystery: State, Defense, Treasury and Justice ride first class; everyone else is in coach. In Obama’s Cabinet, it was Clinton and everyone else.



By all accounts, the two principals buried the hatchet early, bound by a chain of mutual self-interest in promoting the idea that bitter primary rivals could become effective, even affectionate, partners. But a wary Clinton had to be cajoled by Obama into taking the job in the first place, and she began by making a demand that even the powerful Gates couldn’t: complete control over the 200-odd political appointments at the State Department. Obama agreed, but his staff interpreted the directive in a considerably more limited way. When Clinton submitted her list of names to the White House personnel office, at least two came back with red lines through them, according to two people familiar with the process. The first was her longtime communications adviser, Philippe Reines, who was regarded as a sharp-elbowed Clinton partisan who might leak unflattering stories. The second was Capricia Marshall, Clinton’s choice for State’s protocol director, a position that put its occupant in frequent contact with the White House and, in the eyes of Obama’s team, a pick that belonged to the West Wing.


Clinton’s people suspected deputy chief of staff Messina, whom they believed harbored the deepest ’08 grudges, behind the moves. Clinton’s top aide-de-camp, Cheryl Mills, a blunt, uncompromising lawyer who had made her name during Bill Clinton’s impeachment crisis, made it clear that red-lining Reines and Marshall was unacceptable, and after a brief tussle with McDonough the holds were lifted. In a speech at Marshall’s going-away party earlier this year, an attendee told me, McDonough acknowledged how tough that negotiation had been and joked about how the fight “brought Cheryl and I closer together” as the room erupted in laughter.



May 21, 2009 (left): Hillary Clinton and Eric Holder in Washington, D.C. Jan. 24, 2011 (right): Robert Gates with Obama at the White House. | Doug Mills/New York Times/Redux; Kevin Lamarque/Reuters

If Clinton was the most famous person in Obama’s first Cabinet, Gates was probably its most powerful, at least at the start. He wasn’t showy about it, but he let his fellow secretaries know who was boss. Near the end of the Bush administration and his first tour as Pentagon chief, Gates was walking out of the West Wing with Secretary of State Condoleezza Rice when a friendly middle-aged man waved and shouted a greeting. Gates smiled and waved back. He asked Rice who it was. “That’s Mike Leavitt, Bob,” Rice replied, amused. “He’s our secretary of health and human services.”


Gates, brought in by Bush to stabilize the Pentagon after Donald Rumsfeld’s firing, was first among equals in a Republican White House, and he enjoyed an even more commanding position in the early Obama years. Gates served as a crucial bridge between the conservative defense establishment, which favored a slow withdrawal from Afghanistan and Iraq, and an Obama team that wanted out yesterday. The Obama people—especially National Security Adviser Tom Donilon, McDonough (then Donilon’s deputy) and Emanuel—respected Gates and also feared him. The president was a rookie on the international stage; he wanted to focus on the economy and needed to shed the caricature of weak-on-defense Democrats. In the words of one Gates associate, “Obama needed us more than we needed him.”



At a retreat for Cabinet secretaries held at Blair House six months after Obama took office, Gates pointedly informed a White House staffer that he wouldn’t do the Sunday shows unless Obama or someone high up in the West Wing made the request. “I’m going to give you 15 hours a day, but I need to spend weekends to see my family and recharge,” he said, according to a person in attendance. “If the president needs me, I’ll do it, but don’t be sending some little shit to ask me.” The West Wing didn’t enjoy the usual screaming privileges with his communications shop either, even though it “leaked like a goddam sieve,” in the words of a former Obama National Security Council staffer.


The West Wing’s obsessive control of messaging drove Gates crazy, and he felt crowded by young amateurs in the White House who had much less experience and much better access to Obama—guys like McDonough and speechwriter Ben Rhodes, who would weigh in after the secretary’s SUV had departed for the Pentagon. Over the previous four decades, Gates had served in a variety of posts, from deputy director of the CIA to the upper rungs of the NSC, and had seen a gradual increase in White House influence over internal Pentagon affairs. But that trend hit warp speed under Obama. There were far more deputies’ meetings attended by too many lower-ranking aides, and Gates believed an alarming number of White House staffers were being read in on specific war plans.


Most importantly, Gates had significant policy disagreements with Obama. By the time of his exit in July 2011, the lifelong Republican was dissenting more and more on major decisions being pushed by liberal interventionists including Clinton, U.N. Ambassador Susan Rice and NSC adviser Samantha Power. He has called the NATO intervention in Libya “a mistake,” and took a dim view of Obama’s statements of solidarity with the Arab Spring protesters, who, Gates said, represented an unpredictable and destabilizing force.


Since retiring, Gates has become increasingly disillusioned with Obama’s foreign policy; one friend says Gates winced when the president drew his “red line” more than a year ago on the use of chemical weapons in Syria. White House aides are nervously awaiting the publication of Gates’s memoir in January. The manuscript, according to people with whom he’s shared details, questions Obama’s policy choices on the Arab Spring in particular, and even compares the president unfavorably with Bush, sure to be a headline-grabbing assertion.



Feb. 14, 2012: Jack Lew, Hillary Clinton, Gene Sperling and Gary Locke in the Oval Office. | Pete Souza/White House

With 2016 looming, Clinton’s forthcoming memoir of her tenure as secretary of state is unlikely to be nearly as critical, and she has worked hard to remain studiously above the fray. But like most of her aides, my sources told me, she tended to criticize Obama for moving too slowly, and since stepping down she’s made no secret of her view that the current Syrian crisis could have been much better off if Obama had acted more decisively last year to support anti-government rebels, as Clinton and then-CIA Director David Petraeus urged. People close to Clinton say her views align closely with those of her husband, who in June told a private gathering that Obama risked looking like “a total fool” if he heeded opinion polls and acted too cautiously to avert what had all the hallmarks of a massacre in Syria.


For the Obama team, having a 2016 candidate-in-waiting created all kinds of unintended consequences, especially at the end of Clinton’s tenure, when she was mapping out her exit strategy. Early on, she was willing to hit the Sunday shows for Obama, but she considered it an enervating gotcha circus, so by the time the Benghazi firestorm hit on Sept. 11, 2012, she was a firm “no.” When network producers asked if Clinton would appear to discuss the killings of Ambassador Chris Stevens and other U.S. personnel, State Department officials told them the secretary was too exhausted from her recent travels. That wasn’t entirely true, three officials told me: Clinton had a “standing refusal” to do Sunday shows. “She hates them. She would rather die than do them,” one aide said at the time. “The White House knows, so they would know not to even ask her.”


In a classic Washington irony, Susan Rice turned out to be collateral damage. Rice, who started her career in the Bill Clinton White House and then infuriated both Clintons by backing Obama in the 2008 campaign, was at the time the only person Obama was seriously considering to replace Hillary Clinton at State.


And so Rice was tapped by the White House to appear on television that weekend instead of Clinton. The powerful backlash that followed Rice’s assertion that the Benghazi attack appeared to be a spontaneous reaction to an anti-Muslim video effectively ended her State Department nomination. And Obama’s decision to pull the plug on her State Department prospects angered many of Rice’s friends in the West Wing. But Rice may well have had the better of it. She ended up in the West Wing herself, national security adviser to the president in a White House where a staff job like that trumps the prestige and protocol of even the most august Cabinet post.


As Election Day 2012 approached, Rice’s Benghazi nightmare reinforced Plouffe’s tendency to rein in surrogates and lock down departmental policymaking, even to the point of delaying key Obamacare policies. The wry and obsessive former Obama campaign manager had returned to the administration in early 2011, and he quickly laid down the law in a series of conference calls with campaign and White House staff in the early spring. Cabinet officials, he said, were to keep a low profile, and their schedules would need to be routed through his office, located a few feet from the Oval. “I want to see everything,” he told his staff.

Holder kept trying to slip the net. In late 2011, he pitched Obama’s top staff on the idea of delivering speeches on topics ranging from immigration to health care. He was rebuffed: “Do your job, stay in your lane,” was Plouffe’s terse response. In spring 2012, after Holder made a far-ranging address on the legal rationale behind the U.S. drone strike that killed American-born al Qaeda sympathizer Anwar al-Awlaki in Yemen, a furious Plouffe took the uncommon step of prevailing on Obama personally to keep Holder on message, according to Obama aides.

Plouffe also decided to defer the typical second-term transition personnel planning. Stories would leak out, he worried, which could motivate Republicans and suppress Democratic turnout in the presidential election at a time when the Obama team most needed to emphasize the uncertainty of the outcome. The basic prognosis for the post-election Cabinet seemed clear anyway: Gates successor Leon Panetta, Geithner and Clinton were gone, and their proposed replacements had already been identified. Chu, along with lackluster Labor Secretary Hilda Solis, wasn’t asked to leave, but both knew enough to submit their resignations. Obama wanted LaHood and Salazar to stay, but they were unlikely to do so, given their need to make money after years of government paychecks.

Still, Obama was in no mood for a mass turnover. If anything, he craved continuity and peace, in part because Senate Republicans would turn even the least-controversial agency nominations into time-sucking hot-coal walks. So, in the weeks after the election, the president summoned a handful of Cabinet members, one by one, to the Oval Office to discuss their future plans, in the hope that most of them would stay put.

At the top of the question-mark list was Holder, who had told some people he was itching to leave, musing that he could be gone by the summer of 2013. He told others he enjoyed the job and that it was his wife who was agitating for a quick exit.

It’s not clear if Obama asked Holder to stay or if he just didn’t ask him to leave; it was probably some combination. What is certain is that Holder and the president discussed the future a lot during Holder’s many suppers in the residence, which one person close to both men estimated as a twice-a-month occurrence. The president, by all accounts, enjoys being around the garrulous attorney general, and Holder isn’t shy about mixing business with pleasure. During the 2011 Super Bowl, the pair settled their decision to stop defending the Defense of Marriage Act against constitutional challenges. A few weeks after the election, during dinner, Holder presented Obama with a detailed memo containing his plans for the second term, which included increased prosecution of gun crimes, revisiting mandatory minimum sentences and a new raft of challenges to voter ID laws.


Obama was enthusiastic, but he was also aware of his friend’s shortcomings and had told skeptical aides, “Eric isn’t going to stay for the full eight years,” according to one of them. Any hope his enemies had that Holder’s departure was imminent evaporated in the spring of 2013, however, when it was revealed that Holder had signed off on the wiretapping of reporters in a leaks probe. He had no intention of going out under a cloud, he told friends, and he shrugged off rumors that Obama planned to replace him with Massachusetts Gov. Deval Patrick. Not long ago, Holder told a questioner that he planned to stay around indefinitely.


Holder’s decision to stay came as something of a jolt to Janet Napolitano, Obama’s homeland security secretary, who had made no effort over the years to hide her interest in running the Justice Department. The start of Obama’s second term seemed to provide a natural opportunity for a promotion.

Obama liked Napolitano—he twice vetted her for the Supreme Court—and stood by her even when she infamously said “the system worked” after the so-called underwear bomber nearly blew up a flight on Christmas Day 2009. Over the next year, she rehabilitated herself by seizing a central role on immigration, serving as a shield for the White House at a time when Obama was drawing fire from all sides. Obama backed sweeping immigration reform but believed it was politically impossible for him to achieve without first proving he was serious about border enforcement.


Jan. 29, 2013: Janet Napolitano and Obama on Air Force One. | Pete Souza/White House

Napolitano embraced the approach. For three years, she presided over an unprecedented crackdown at the Mexican border, shattering Bush-era records with nearly 1.2 million deportations between 2009 and 2012. But as the election approached, Hispanic advocacy groups began to view the crackdown as an emblem of Obama’s unfulfilled promises for immigration reform and started asking uncomfortable questions: Latinos had given Obama almost 70 percent of their support in 2008 for this? Several of Obama’s top advisers, led by West Wing staffer Cecilia Muñoz, pressed for a more lenient border policy, pushing Napolitano to shift to a more targeted detention policy aimed at capturing criminal aliens, a half-dozen aides involved in the process told me.

Napolitano agreed, but she wanted to move slowly, to get buy-in from agents in the field. Muñoz and the Obama campaign’s Hispanic outreach team suspected Napolitano was “looking after her own politics,” with an eye toward another run in Arizona or even a national campaign. The stalemate broke in mid-2012, when Napolitano presented the White House with a memo calling for “prosecutorial discretion,” which dramatically cut the number of deportations.

Napolitano’s actions hadn’t endeared her to the left, but Obama and his team thought that Big Sis—among themselves they adopted the nickname pinned on the secretary by Matt Drudge—had a good sense of how to calibrate policy and political imperatives. That didn’t guarantee a promotion, even though Obama and his team had hinted at one for years, with Obama’s aides, in their efforts to get her to take the DHS post in 2008, even describing the job as a “first step,” according to a person involved in the transition.

During her post-election Oval Office sit-down with Obama in late 2012, Napolitano suggested that she would serve in any role Obama wanted, but she also made a point of telling him she wasn’t the source of stories suggesting she was gunning for Holder’s job. Obama was his usual vague self, offering Napolitano a hearty thank you and an oblique assurance that she would play a vital role in the second term. She responded with a vow to stay around for “roughly another year.”

But Napolitano was restless. According to two administration officials who later spoke with Holder, she pulled him aside during a joint trip to Germany in May and said, “Every organization needs to have a change after a while,” which Holder interpreted as a request to go. People close to Napolitano deny she said that, insisting she told him, “I’m having a good time at DHS.”

But Holder said he felt the pressure. “Sometimes I feel like Janet is touching me just to see if I’m still warm,” he joked to a friend.

By last spring, a frustrated Napolitano fielded a call from a headhunter looking to fill the University of California’s president post. When she dropped by the Oval Office to tell Obama she was mulling the move, the president was chagrined but not surprised: “Oh shit, Janet!”



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