President Reagan announced yesterday that two of the most powerful figures of his administration, Treasury Secretary Donald T. Regan and White House chief of staff James A. Baker III, will swap jobs in the most dramatic of several personnel changes expected to put a new face on the White House staff in Reagan's second term.
Administration sources also said Reagan has decided to nominate Energy Secretary Donald P. Hodel to replace Interior Secretary William P. Clark, who has resigned to return to his California ranch. An announcement is expected today.
There are several candidates for Hodel's job, including White House personnel director John S. Herrington, officials said. They predicted that Regan would bring in his own team at the White House and said presidential assistant Richard G. Darman probably would leave for a Treasury Department position involving international economics.
Craig L. Fuller, another key Reagan assistant, may remain for a while "to help with the transition," officials said.
The president approved the Baker-Regan swap late Monday, the same day it was proposed to him through deputy chief of staff Michael K. Deaver, who also is leaving. Although the president was unaware of it, Regan and Baker had discussed the swap privately over lunch several weeks earlier in Regan's Treasury Department office, officials said.
Regan said yesterday that the idea of the shift was his, but Baker had let it be known for months that he had grown weary in the White House and wanted a Cabinet post. "It was time to move on," Baker said yesterday. Asked in an interview why he wanted the job as White House chief of staff, Regan said, "I'm not tired, and I'm not frustrated." At their meeting, Regan had said to Baker, "Let me make you an offer you can't refuse," according to the officials.
Announcement last week of Deaver's impending departure was accelerated to clear the way for the Baker-Regan swap, although the president was unaware that Regan and Baker were then considering their shift, officials said.
The president was not told about the swap plan earlier because "we knew unless it was accepted by Baker and Regan , Reagan was not going to decide to do it," a senior official said.
The key was Deaver. Regan had told Baker that he would not agree to the swap if Deaver wanted to be chief of staff, according to White House spokesman Larry Speakes. But, when Deaver learned of the possible swap, he said he would rather leave the White House, probably for a public relations job, Speakes said.
Flanked by Regan, the maverick former chairman of Merrill Lynch & Co. Inc., and by Baker, the polished Houston lawyer and political tactician, the president made an unexpected appearance before reporters at the White House to announce the shift.
"After four grueling years in their current positions, their desire for change is completely understandable," Reagan said, adding that the swap will become effective upon Baker's confirmation by the Senate.
Other key White House aides in Reagan's first term who are leaving include counselor Edwin Meese III, recently renominated as attorney general, and Faith Ryan Whittlesey, director of public liaison, who is expected to be nominated as ambassador to Switzerland.
There has been speculation that the president would offer a post to Jeane J. Kirkpatrick, who is resigning as U.N. ambassador, but Regan said yesterday that talk about it would be "premature."
Regan said he has "no plans" for the current White House staff and will talk to the president's top assistants about their future. Among deputies Regan might bring to the White House, other officials said, is Interior Department Undersecretary Ann Dore McLaughlin, a former assistant treasury secretary under Regan.
Regan is expected to have far more latitude than did Baker because, under current plans, he will not be sharing authority, as Baker did with Meese, Deaver and, for a while, Clark.
The treasury secretary, known for a blunt-spoken style, was asked yesterday about ideological divisions in the administration that marked Reagan's first term and often plagued Baker.
The president "should set the ideology for the rest of us," Regan said. "After all, he's the man that was elected, not us. He was elected on the basis of what he enunciated to the people as being his plans, his policies, his philosophy, and it's that I'm committed to and that I want to see carried out."
Regan said he welcomes "a diversity of opinion" when a decision is under review but said, "Once that decision is made, then I think it's up to everybody to stay on board."
Republican political operatives who have worked closely with Baker expressed concern at what they described as Regan's lack of political experience. Regan acknowledged that this was not his strength, saying, in a half-joking tone, "I'm a political novice, as you know."
But Regan said he has had four years of exposure to politics in his current post and added, "I can get experts in that area."
In making the announcement, the president said Baker as treasury secretary will "become chief economic spokesman for my administration" and remain on the National Security Council, as will Regan. As chief of staff, Regan would retain Cabinet rank.
The first discussion about the Baker-Regan swap occurred after the Nov. 6 election. Baker had told Cabinet members and White House colleagues that he wanted to move out of the West Wing during the second term, although some expected him to remain at least for initial tax and budget battles.
"It looked to me as though the president were losing a lot of his very close advisers," Regan said yesterday of his swap offer, noting the departures of Clark, Meese and Deaver.
"I knew that Baker wanted out, so it seemed to me that somebody had to step into that breach there. And call it foolhardy, call it what you want, I figured that well, hell, I am probably as well suited as anybody to do the job if the president wuld like it," he said.
When Regan introduced the idea last month, Baker said he was interested but that he would not personally propose it to the president and that Deaver should be informed, according to Speakes.
It fell to Deaver, the aide personally closest to Reagan, to present the swap idea to the president Monday morning.
Reagan said he wanted to talk to Baker and Regan, Speakes said. The president approved the swap after seeing both men and talking again to Deaver. After Deaver visited Reagan in the White House living quarters yesterday morning, the timing of the announcement was set, Speakes said.
Most members of the White House staff learned of the plan within the hour before the president announced it.
Many of those who have worked under Baker said they thought that it was a wise shift. "It gives us a shot in the arm for a second term," one official said, while another observed that Baker and Meese are likely to remain influential forces in the administration although no longer at the White House.
Although Regan has occasionally been at odds with Office of Management and Budget Director David A. Stockman, he said yesterday that he has worked well with Stockman and would have "a long talk" with him. Other officials said they felt that Regan would bring "new blood" to the struggle to trim the federal budget deficit.
Regan, who served as a member of the budget working group this year, was outspoken in demanding that the president scale back his military buildup, but the president rejected the advice. Regan said yesterday that he intends to talk to the president about a White House plan to abolish the Council of Economic Advisers.
Baker is not expected to have difficulty winning Senate confirmation, and officials predicted that the transfer of power may occur in the early spring.
Officials said Reagan also decided late yesterday to nominate Hodel to head the Interior Department. He was strongly backed for the post by Clark, who has said he will return to his California ranch, and by Meese, officials said.
The appointment increases the likelihood that Reagan will move to merge the Energy and Interior departments, officials said. While vacationing in California over the new year holiday, Reagan instructed Clark to prepare a blueprint and recommendations for merging the departments, a senior official said.
Officials of both departments are working on the blueprint, and the issue may come up at A Cabinet meeting this week.
The decision on whether to replace Hodel as secretary of energy had not been made as of late yesterday, officials said. Herrington is being considered for the post, and some officials noted that McLaughlin also has experience with energy issues.
With the exception of Speakes and White House counsel Fred F. Fielding, most of the top officials who served during the first term have left or are planning to leave.
This means that, in the second term, policy and important decisions involving communication of administration positions may be in the hands of an entirely different group.
Regan has been staunchly loyal to the president, and officials said his convivial personality and style as a raconteur also had drawn him closer to the president.
Yesterday, Regan displayed on his desk a baseball bat that aides had presented him for his new job. Asked about the stock market's reaction to news that he would become chief of staff, Regan said it was quiet, "which is probably the best news, since it usually panics when I do anything."