Time magazine national political correspondent Karen Tumulty told "Good Morning America" that Sen. Ted Kennedy, D-Mass., was furious at the initial motives put out by anonymous aides to Caroline Kennedy who said she withdrew out of concern for her uncle. The family patriarch is battling brain cancer and suffered a seizure during an inaugural lunch for President Obama Tuesday, but is otherwise doing fine, according to Tumulty.
Caroline Kennedy's confidantes later told ABC News that her "personal reasons" were unrelated to her uncle's health.
Despite the messy end to Kennedy's Senate ambitions, this may not be the end of her political hopes. Tumulty said that Kennedy, known for years as the "shy Kennedy," may be offered a job in the Obama administration.
"I think this whole episode has shown that maybe she's not suited for the rough and tumble of elective office, especially in a place where, like New York, people play politics with their elbows," Tumulty said.
"I wouldn't be at all surprised if we see her getting some kind of appointment in the Obama administration because she was very, very helpful to his getting elected," she said.
Kennedy's endorsement of Obama last year, along with that of her uncle, came at a crucial point in Obama's long primary battle with Clinton for the Democratic Party's nomination.
The Senate selection has political importance for Paterson, who took office after former Gov. Eliot Spitzer resigned in the midst of a scandal with a call girl.
Paterson will have to run for reelection in two years and will likely be facing Republican powerhouse Rudy Giuliani. Rep. Pete King, a Republican from the Long Island suburbs, has already said he will run for the Senate in two years.
Paterson wanted a Senate pick who would be a strong candidate two years from now to bolster his chances.
ABC News' George Stephanopoulos contributed to this report.