The premise of this NYTimes article on the derailment of Kennedy's bid to succeed Hillary, is that the governor's office did somehting akin to what Eliot Spitzer did to GOP senate leader Joseph L. Bruno at the beginning of his administration- namely, leak information to bring down a political foe:
One of the administration’s central claims to reporters was that Ms. Kennedy had, in the words of a person close to the governor, "a definite tax issue" and "a nanny problem" that "she didn’t want to become public."
But that story was inaccurate. The governor and his aides now acknowledge that those issues — a tax lien of a few hundred dollars in 1994, and a lapsed visa for a foreign nanny who worked for Ms. Kennedy during the late 1980s — had been resolved years earlier and were never considered disqualifying during the vetting process.
Well isn't that interesting? The issues which supposedly lead to Kennedy withdrawing herself from consideration, were completely bogus. So who put these canards into circulation?
Well, in a decent bit of investigative journalism, the two reporters who put together this report apparently found the culprit:
According to advisers to the governor who were involved in the process, the leaks against Ms. Kennedy were coordinated by Judith A. Smith, a consultant who has been acting as the governor’s top communications strategist..
and in a late January visit to the governor's Manhattan office:
... she told at least two people to call major media outlets around the state. She instructed them to tell reporters that the governor had been dismayed by Ms. Kennedy’s public auditioning for the job, that he never intended to select her as senator, and that the tax and nanny issues had led her to pull out of consideration.- In Attack on Kennedy, Echo of a Spitzer Tactic
One can only assume Paterson directed Smith to do this. But why? My short answer is that, when it became public knowledge that Bloomberg was behind the Kennedy appointment, the New York state Democratic machine suddenly began gagging on a furball. How dare Bloomberg meddle in their party? There was no way the state party would swallow Bloomberg's influence. And, up until shortly before the "tax/nanny gate" story broke, Paterson was acting by all appearances (to many observers including myself), that he would indeed select Kennedy.
So I believe the Bloomberg revelation immediately initiated pushback by Democrats, and Paterson relented. But who were the Democrats behind this? Cuomo? Hillary? Gillibrand?
I can only guess, but I do not believe Kennedy herself had a change of heart and removed herself voluntarily (although that was the official verison finally reported). The initial (and it turns out erroneous) reports that she was doing it because of Uncle Teddy's illness prove that the Kennedy staff were not prepared for the backtrack. I think it's clear that once Paterson's intention to not pick her was recognized, she withdrew simply to save face. But who pushed her out?