Soon after Barack Obama was first elected president, an aide told me that Obama hoped to make his mark on the Department of Defense in a very specific way: After then-Secretary of Defense Robert Gates stepped down a few years hence, Obama would nominate a strong Democrat to the post, establishing a precedent of sorts for the building and for the Democratic Party after years of perceived weakness on national security matters. Leon Panetta was a natural fit. But Obama, in nominating Chuck Hagel, a Republican former senator from Nebraska, has new priorities now that he's been president and understands the massive institutional and political obligations that the Secretary of Defense has, and by proxy, the role that the Secretary plays in terms of providing him with advice and counsel.
Why isn't Obama replacing Panetta with a Democrat? Simple: Of all the possible candidates, he trusts Hagel. Hagel was the head of Obama's intelligence advisory board, and was a frequent informal "red cell" brain that Obama privately turned to when he wanted a second opinion. He has been picking Hagel's brain on subjects as diverse as Afghanistan, China, special operations force posture, and intelligence for several years now. (Hagel has all the required clearances.)
There will be quite a bit of discussion in the coming days about Hagel's views on Israel (he is more skeptical of Israel's provocative actions publicly than many previous SecDefs, but his public views are close to the private views of many in the administration), the Afghanistan drawdown (how many troops will remain and what will they do) as well as gays in the military. (Hagel will be a fine, if somewhat forced, convert to the new gospel). His confirmation hearing will be interesting, because he will confront former colleagues who think he's a showboat and turncoat. Good television!