In his third day on the stand at his corruption retrial, the ousted governor began addressing the most explosive allegation against him -- that he tried to sell or trade Obama's Senate seat.
Blagojevich said supporters of U.S. Rep. Jesse Jackson had promised to do "accelerated fundraising" for him if he appointed Jackson.
But Blagojevich said such a deal didn't appeal to him and sounded improper. He said he had no intention of appointing Jackson with or without the offer of money.
He rattled off a list of candidates he was considering before Obama's election as president in November 2008, and Jackson wasn't on the list, which included Illinois Attorney General Lisa Madigan and several African-American politicians.
"I obviously had a hard time making this decision, but there was a method to the madness," Blagojevich told jurors. "I honestly believe I was on the right track, then everything changed."
Blagojevich eventually appointed former Illinois Attorney General Roland Burris, who is black.
Earlier Tuesday, the ousted governor devoted most of his testimony to allegations that he tried to squeeze executives for cash, including road builder Gerald Krozel and hospital CEO Patrick Magoon.
"Rod, did you ever try to shake down Gerry Krozel for a political donation?" defense attorney Aaron Goldstein asked.
"No, no," Blagojevich responded, shaking his head slightly.
"Did you threaten him in any way?" Goldstein asked him later.
"No," Blagojevich said again.
Krozel himself had testified earlier for the government that Blagojevich pressured him by dangling the possibility that he might launch a multibillion-dollar highway program urgently needed by the ailing industry. Krozel said Blagojevich made it clear the state program was contingent on the donation.
Prosecutors also accuse Blagojevich of threatening to cancel an $8 million pediatric care reimbursement unless the CEO of Children's Memorial Hospital in Chicago came up with a campaign donation.
Magoon, testified for prosecutors that he never made the donation because he felt wrongly pressured by Blagojevich.
Blagojevich said Tuesday that he never tied the reimbursement action to any campaign cash, insisting he had a good relationship with Magoon, who had donated money to him in the past. He also sounded emotional as he described his strong attachment to the hospital.
"Children's Memorial Hospital was a very personal place for me," Blagojevich said. "I had a cousin who died there when he was 12 years old."
Blagojevich, 54, denies all wrongdoing. He sounded more at ease on the stand than he did last week. But Judge James Zagel continued to interrupt him to tell him to not wax on about other matter when asked simple questions.
"I understand that given your background that maybe you would like to give us a lesson about how government works," Zagel said. "Just answer the questions."
Prosecutors objected more than 40 times when Blagojevich slid off on tangents, turning to face the jury as he tried to detail popular policies, including his efforts to keep tollway fees from rising and "get results for people."
For their part, the defense made a novel complaint to the judge: Prosecutors, said Lauren Kaeseberg, keep making faces while Blagojevich testifies.
"The jury is noticing this," she said. "It's distracting ... contesting the governor's credibility."
The prosecution table is just a few feet from the jury box, and the government attorneys sit directly facing jurors. They sometimes whisper to each other or appear to grimace disapprovingly or shake their heads slightly.
Zagel said he hadn't noticed the faces but added, "I'll watch the government very carefully."
Blagojevich also demonstrated, once again, that he and technology don't get along.
As testimony began Tuesday, the judge called a recess so technicians could figure out why Blagojevich's microphone kept going on and off.
"This is not my fault," the former governor said as the mic cut in and out. But it turned out he had set a binder with FBI wiretap transcripts against the on-off switch. He apologized to jurors, saying, "I misspoke. Evidently, it was my fault."
As a contestant on "Celebrity Apprentice" last year, TV viewers saw Blagojevich struggling to figure out how to text from a cell phone.
The former governor faces 20 criminal counts, including attempted extortion, conspiracy to commit bribery and wire fraud. If convicted on all counts, the maximum penalty is a 350-year prison term, though guidelines would suggest he get far less. Among the considerations a federal sentencing judge can factor in is whether a defendant lied on the witness stand.
In his first trial last year, Blagojevich was convicted of lying to the FBI.