Amid today’s coronation of Nancy Pelosi as Speaker of the House, there’s another (and arguably, a more important) story, breaking in the nation’s capital.

The Associated Press and other media outlets are reporting that the Director of National Intelligence (DNI), Ambassador John Negroponte, is leaving that post to become the Deputy Secretary of State under Condolezza Rice. Retired Navy Vice-Admiral Mike McConnell, a former Director of the National Security Agency, is said to be a leading candidate to replace Negroponte. McConnell is currently a senior vice president at Booz, Allen, Hamilton, a major defense contracting firm.

Both the White House and the DNI office are refusing comment on reports of Negroponte’s departure. The nation’s former Ambassador to Iraq (and a career foreign service officer) became the nation’s first DNI in April, 2005, unifying 16 different intelligence organizations under his leadership. At the time, Negroponte was viewed as an unusual choice for the DNI post, since he had no prior experience in the intelligence business. Since becoming the nation’s senior intelligence officer 19 months ago, Negroponte has been praised for his attempts to reform the intel community, and implement changes recommended by the 9-11 commission.

But Negroponte’s tenure has not been without its problems. Efforts to intercept and crack enemy communications remain hampered by a lack of trained linguists and improvements in technology. U.S. efforts in human intelligence (HUMINT) also remain hobbled, and Negroponte faced internal challenges from the CIA (which led the intel commuinty until the DNI post was created) and from the Pentagon, where former Defense Secretary Don Rumsfeld envisioned a much wider role for his intelligence assets.

While #2 at State is considered a “plum job,” it’s also worth remembering that DNI post is considered a cabinet-level job. So, in that respect, Negroponte’s “transfer” would appear to be a demotion, raising questions about why he would want to give up the job as our nation’s intel czar to serve as Dr. Rice’s deputy at the State Department.

I believe there are several potential answers for that question. First, I believe that Negroponte may back to his old organization as a “Secretary of State” in waiting, signaling the potential departure of Coldolezza Rice in a matter of months. After four grueling years as National Security Advisor and two more as SecState, Dr. Rice is probably burned out, and looking forward to the next chapter in her life, including potential political options. Dick Morris has been beating the drum for a Rice presidential run in ’08 for at least two years. While Dr. Rice has been non-committal, leaving the State Department this year would allow her to seriously explore future options. When Rice departs, Negroponte moves up to become Secretary of State.

On the other hand, Ambassador Negroponte may have become disillusioned with the spook world, where change is always slow and difficult. One of his biggest challenges was–and is–exerting control over so many intelligence functions, many of them “owned” by other organizations within the federal government. DoD, for example, controls four of the most important intelligence agencies: the National Security Agency (NSA), the Defense Intelligence Agency (DIA), the National Geospatial Intelligence Agency (NGA) and the National Reconnaissance Office (NRO). Trying to make those agencies more responsive to DNI leadership is a herculean task, particularly when a strong SecDef–like Rumsfeld or Gates–maintains tight control over their leadership and assets. Despite Rumsfeld’s recent departure, Negroponte may have grown tired of fighting turf battles, and wanted a return to the more familar territory of the State Department.

Additionally, the transfer of Mr. Negroponte may reflect continuing dissatisfaction, within the White House and Congress, over the quality and effectiveness of our intelligence efforts. President Bush is currently formulating his new strategy in Iraq, and that plan will likely contain revised marching orders for the intel community. While the spooks in Iraq have produced a number of successes (namely, the elimination of al-Zarqawi last May) , they’ve also struggled to produce actionable intel on IEDs and the militias now running rampant in portions of that country. With Congressional Democrats now promising hearings on intelligence in Iraq, the White House–and Mr. Negroponte–may have decided that it’s time for a change in leadership at the DNI.

As for his replacement, the expected nomination of Admiral McConnell as DNI reflects the influence of both Vice President Cheney and new Defense Secretary Robert Gates within the administration. McConnell served as Director of Intelligence for the Joint Staff (J-2) during the first Gulf War, when he delivered periodic press briefings on Saddam’s military forces. Admiral McConnell was appointed to that post by then-SecDef Cheney, and in that capacity, he worked with the Director of Central Intelligence (DCI), none other than Robert Gates.

Negroponte is still highly-regarded within the White House, so I believe this move is the first step in making him the next Secretary of State, and not a demotion in the normal sense of that word. As Rice’s deputy, Negroponte can quickly get up to speed on various diplomacy initiatives and the daily workings of the department, in prepration for her departure later this year.

His replacement at DNI (presumably, Admiral McConnell) still faces lots of heavy lifting in getting the various intel agencies in synch, while wrestling with the over-arching problems (language skills, HUMINT, advances in secure communications technology) that still face the community. But, with Mr. Gates at the Pentagon–and his own background in military intelligence–Admiral McConnell will find it far easier to exert influence on DoD’s intel components. The turf battles won’t completely end, but the relationship between DNI and DoD will be far less combative than during the Rumsfeld-Negroponte era.

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Addendum: Admiral McConnell generally received high marks for his performance as JCS J-2. But his leadership of NSA was average at best; many of the problems that confronted General Mike Hayden during his tenure at the agency festered and grew worse during the administration of Admiral McConnell and his successor, Air Force Lieutenant General Kenneth Minihan. Also, I’m told that Hayden didn’t get the DNI job because he has “too much work to finish” as CIA Director.