Clinton's Sec. of State Chances Improving Obama and Clinton said to be optimistic that the assignment will happen.

Nov. 18, 2008  -- President-elect Barack Obama is inching closer to naming former rival Sen. Hillary Clinton as his secretary of state, ABC News has learned.

Serious progress has been made in the talks between the two, leaving both Obama and Clinton increasingly optimistic that the assignment will happen, sources say.

Putting Clinton in charge of foreign policy would make for a remarkable partnership, considering the long and bitter primary battles between the two senators for the presidential nomination, and their intense tangles over foreign policy.

Clinton would give the Obama administration someone who is already a familiar face to many foreign heads of state, as well as to foreign populations around the world, who know her and her husband from the Clinton presidency.

Her appointment, however, would also come with complications stemming from Bill Clinton's constant world travels and fundraising among foreigners for his presidential library and William J. Clinton Foundation.

Bill Clinton's ventures are being vetted by Obama attorney Christine Varney, as well as by Obama transition officials, who are known and trusted by the Clintons, as well as by some officials at Clinton's philanthropic foundation to make sure there is nothing that could complicate or compromise an Obama foreign policy.

For instance, the most widely reported example of potential presidential embarrassment or policy complications are reports that Bill Clinton traveled to Kazakhstan in 2005 with mining investor Frank Giustra, despite criticism from U.S. officials, including Hillary Clinton, of the country's human rights record, as first reported by the New York Times.

Within days of the trip, Giustra's company landed a multimillion dollar deal to buy into uranium projects with Kazakhstan. Months later, Giustra donated $31.3 million to the Clinton foundation, with a pledge of more to come.

Nevertheless, sources familiar with the negotiations believe Clinton's appointment as secretary of state could perhaps happen as early as next week.

Obama has made a point of mending fences with his former rivals. He met with Hillary Clinton at his Chicago transition headquarters last week and sat down Monday with Sen. John McCain, the Republican he defeated on Election Day.

The president-elect also met with New Mexico Gov. Bill Richardson, another one-time presidential contender who later endorsed Obama.

Obama to Meet Today With Joe Biden

The only thing on Obama's schedule today is a meeting with vice president-elect Joe Biden.

Behind the scenes, however, the Obama camp is cobbling together a Cabinet and a White House staff. A domestic policy adviser and White House counsel are expected to be named this week, with Cabinet appointees coming possibly next week.

Sources said that Obama is trying to design a team that fits together like a jigsaw puzzle, as Obama transition co-chairwoman Valerie Jarrett explained recently.

"He wants to make sure it represents the diversity of our country, diversity in perspectives, diversity in race, diversity in geography," Jarrett told "Meet the Press" earlier this month.

The transition team also wants to be sure that personnel can get along, and that it does not rely so heavily on former Clinton administration officials that it looks like a third Clinton term.

Consideration of Hillary Clinton for secretary of state highlights that dilemma for Obama, who has already tapped several former Clintonistas for top jobs.

For instance, Larry Summers has been a leading candidate for Treasury secretary, but he already served that role in Bill Clinton's administration, and that could complicate his chances.

"There's no question there are going to be people who had experience in the Clinton administration at some level who will be considered," said Leon Panetta, Bill Clinton's former chief of staff who heads Obama's transition team. "But I think there will be a lot of other people considered as well."

Consideration of Hillary Clinton has other ramifications. Lawyer Greg Craig was said to have wanted a foreign policy job at the National Security Agency or the State Department, but Craig and Clinton are said not to get along.

That's one factor that now has Craig instead in line for the White House counsel job, sources said.