Obama names Panetta, Blair as top spymasters

By Randall Mikkelsen

WASHINGTON (Reuters) - President-elect Barack Obama named two intelligence outsiders on Friday as his top spymasters to play a leading role in restoring what he has called a tarnished U.S. image abroad.

Obama nominated Leon Panetta, White House chief of staff to former Democratic President Bill Clinton, as CIA director, and retired Adm. Dennis Blair to oversee all 16 U.S. spy agencies as director of national intelligence.

Panetta and Blair did not come up through the ranks of intelligence agencies, and their nominations reflect Obama's determination to restore a U.S. reputation battered by accusations of torturing suspected terrorists and secret wiretapping of Americans' overseas phone calls.

"To be truly secure we must adhere to our values as vigilantly as we protect our safety, with no exceptions," Obama said in announcing his picks.

"Under my administration the United States does not torture. We will abide by the Geneva Conventions. We will uphold our highest ideals," he said.

Obama pledged to ensure that U.S. intelligence is accurate and untainted by politics, after the spy agencies failed to prevent the September 11 attacks and wrongly concluded that Iraq had weapons of mass destruction.

Obama rounded out the team with current or former intelligence professionals. He saluted the intelligence rank-and-file and stressed a need to defend the country against terrorism and other threats.

"There is no margin for error," he said.

Blair, 61, is a U.S. Naval Academy graduate who earned a master's degree from Oxford while on a Rhodes scholarship. He has served as commander of U.S. military forces in the Pacific, as well as stints on the White House National Security Council and as a CIA military liaison.

Panetta, 70, a former U.S. congressman, was White House budget director under Clinton before becoming his chief of staff, where he had access to presidential intelligence briefings. He also served on the bipartisan Iraq Study Group established by Congress in 2006 to assess Iraq war policy options.

CRITICISM, BUT NOT THREAT

The selections of Panetta and Blair have faced criticism, but there has been little sign yet that either would face a serious threat to his nomination. Both must be confirmed by the Senate.

California Democratic Sen. Dianne Feinstein, who chairs the Senate Intelligence Committee which will consider the choices before they go to the full Senate, said this week the CIA would be better led by an intelligence professional.

After lobbying by Obama, Feinstein said she would listen to Panetta's plans. She said separately she intended to quickly confirm Blair.

Some human rights advocates say Blair was too close to Indonesia's military as Pacific commander, when the country was accused of oppression in East Timor. A government watchdog, the Project on Government Oversight, has accused him of financial conflicts of interest.