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CEO in chief

By Nina Easton, Washington bureau chief
November 7, 2008: 1:09 PM ET

It's been a remarkable evolution of counselors that began with two young friends, Harvard's Jeffrey Liebman and the University of Chicago's Austan Goolsbee. The two men were close from their days as graduate students in Cambridge, Mass., so when a former student of Liebman's who was working as a policy aide for Obama - then a little-known state senator - asked for advice on Chicago-area economists his boss could turn to, it was natural that Goolsbee's name should come up. The pair was joined by other academics, including Harvard's David Cutler on health policy, Georgetown's Daniel Tarullo on trade, and Bernstein of the liberal Economic Policy Institute on the middle-class squeeze, among others. A respectable crew, but hardly household names.

Obama's aggressive outreach continued, however, and a year into his presidential campaign, the Senator was soliciting advice from former Federal Reserve chief Paul Volcker, who coached the candidate for a well-timed speech on financial regulation. Around that time Obama started a phone dialogue on tax and finance policy with another heavyweight: billionaire Warren Buffett, "one of my favorite people - one of those rare people who is exactly how you hope he will be," Obama told Fortune last summer.

In the heat of the Democratic primary, it was hard to distinguish Obama's views from the liberal agenda of organized labor. But early on there were hints of more complexity among the advisors he tapped. Even as Obama was railing on the stump against free-trade agreements, Goolsbee took a more nuanced view, creating a scandal when news broke that he had reassuringly whispered to Canadian officials that the candidate's "protective [rhetoric] is more reflective of political maneuvering than policy," according to a memo summarizing the meeting. Obama condemned NAFTA as a "mistake" during the primary while he battled Hillary Clinton in manufacturing states, but in the June interview with Fortune he backed off his earlier language, calling it "overblown."

That same day he made another move toward the middle when he announced that economist Jason Furman would be running his economic policy shop. The Harvard-trained Furman ruffled the labor crowd because he had written an academic defense of Wal-Mart (WMT, Fortune 500), arguing that its low prices helped struggling workers. Just 38 years old when tapped by Obama, Furman began to adeptly manage the candidate's growing stable of economic experts.

"These are good friends of mine," he told Fortune. Those friends and colleagues included the Clinton advisors who came flooding into the campaign after the former First Lady bowed out of the race - Robert Reich and Lawrence Summers, and former White House advisors Laura Tyson and Gene Sperling, among them.

By the end of July, Obama had convened a summit on the impending financial crisis that also included Robert Rubin, former Bush Treasury chief Paul O'Neill, J.P. Morgan Chase (JPM, Fortune 500) CEO Jamie Dimon, Google CEO Eric Schmidt, and PepsiCo CEO Indra Nooyi, as well as top union leaders.

By August, Obama was phoning Treasury Secretary Hank Paulson for personal briefings on the Bush administration's reaction to the market turmoil. It was this advisor heft, more than anything, that enabled candidate Obama to establish his credentials as a potential President when the markets went into a spine-chilling tailspin, while McCain - relying on his instincts more than on outside expertise - shifted directions in a pattern that his opponent quickly tagged as "erratic."

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