Panetta is expected to leave the administration at some point, but did not serve for the full four-year first term, having taken over just last year from Robert Gates, a holdover from the previous Bush administration.
Also known as a budget specialist, Panetta may stay in place until expected spending reductions are factored in to the Pentagon’s budgetary plan to return to his walnut farm in California’s Carmel Valley.
The current favorite to succeed him is Michele Flournoy, who served as under secretary of defense for policy early in Obama’s first term.
Her appointment may appeal to Obama’s sense of history as she would be the first woman to hold the role.
Should Flournoy not get the job, some defense analysts think that the current deputy defense secretary Ashton Carter could be in the frame.
There may also be other cabinet departures. It is unclear whether Attorney General Eric Holder, a close associate of Obama who has had a bruising from Republicans, will stay on.
Education Secretary Arne Duncan is expected to remain in place to pilot through Congress Obama’s reform program, likely a highlight of his second term agenda.
Obama may also have some shuffling to do at the White House, especially if Lew moves to Treasury. His political guru David Plouffe is expected to leave and there may be other high profile departures.
The president sparked speculation on Tuesday when he said he wanted to sit down with Romney to work out how they could take the country forward.
Obama’s first term “Team of Rivals” approach of choosing former political foes like Clinton, modeled on that of his hero Abraham Lincoln, could apply in Romney’s case, perhaps in a job like Commerce Secretary.
However, it is unclear whether Romney would be prepared to swallow his pride and work for the man who vanquished him in a bitter White House campaign.
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