The White House: Obama's New Inner Circle

In a targeted makeover, Obama brings in Chicagoan Bill Daley and nods to Big Business

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J. Scott Applewhite / AP

President Barack Obama listens as his new White House Chief of Staff William Daley makes a statement in the East Room of the White House in Washington, Thursday, Jan. 6, 2011.

To hear White House aides explain it, Barack Obama's first White House staff was assembled on the fly. "There was no time to fine-tune," says Dan Pfeiffer, Obama's communications director. "We were bolting the wings on as we took off."

An overhaul was overdue. Senior aides began trading memos months ago about the missteps of the first two years. The list was long: Short-term tactics often obscured strategic goals. Too many people had overlapping responsibilities. Obama, surrounded by a surplus of true believers, lacked fresh perspectives. The economic team was riven by personality conflicts and hampered by a national economic adviser, Larry Summers, who behaved more like his own advocate than an honest broker. Other advice, whether it was from Cabinet Secretaries or the business community, was stifled before it could be heard.

The new lineup, Obama aides say, is designed to fix all that. David Plouffe, the former campaign manager, has returned as the new internal taskmaster, charged with bringing more discipline to communications, political outreach and strategic planning. Gene Sperling, a former Clinton Administration official most recently at Treasury, won the job to replace Summers by promising to be more collaborative, particularly with business groups and the Cabinet. Sperling is a high-octane intellect who can get along with anyone, and he will find himself working with a coterie of Obama insiders, including Austan Goolsbee and Jason Furman, who have been promoted from within. More private-sector executives will come aboard soon as outside advisers in the hopes of diversifying White House policy discussions.

David Axelrod, whose reputation for political genius never included organization, will leave to begin working on the re-election campaign. Robert Gibbs, the press secretary, will resign after six years with Obama, choosing the job of outside campaign consultant over a senior-aide position without a clear portfolio. Valerie Jarrett, who took flak for her outreach efforts to business, will remain in place with an eye to improving frayed relations. A new press secretary is expected to be named soon.

But Obama's biggest change was naming Bill Daley, the son and brother of Chicago mayors and a longtime mentor to both Axelrod and Rahm Emanuel, to be his new chief of staff. Daley is matter-of-fact cool where Emanuel could be hot and, at times, heavy. Democrats and CEOs have turned to Daley for sound advice for decades; he is frank, funny and political down to his bluchers. He is not known as an organizational whiz, but he is, in the words of one senior aide, "an adult" capable of getting the respect of the Washington trifecta: the press, the business community and Congress.

Compared with the sometimes dour Axelrod, Daley will be a better stand-in on TV and with the business community from which he comes and which widely praised his appointment. "This will free up the President a little more to focus on his vision," says the senior official. "We need to elevate the President." Daley is likely to announce that he will recuse himself from some issues he worked on for his former employer, JPMorgan Chase.

Obama and Daley aren't strangers to friction — or how to cut it. Years ago, Daley held a fundraiser for one of Obama's opponents in the U.S. Senate primary. He had the foresight to send Obama a handwritten note telling the future President that if he won the runoff, Daley would be the first guy in his corner. When the 2008 campaign began, that was quite literally the case. And now it's official.