"Tom, i want to talk to you with regard to the Senate seat," Obama told him.
Balanoff said Obama said he had two criteria: someone who was good for the citizens of Illinois and could be elected in 2010.
Obama said he wasn't publicly coming out in support of anyone but he believed Valerie Jarrett would fit the bill.
"I would much prefer she (remain in the White House) but she does want to be Senator and she does meet those two criteria," Balanoff said Obama told him. "I said: 'thank you, I'm going to reach out to Gov. Blagojevich."