According to this article at CathNews, which cites Catholic News Service:
Catholic News Service says Archbishop Levada was one of the first residential bishops to be granted an audience with Pope Benedict XVI.
Archbishop Levada served on the staff of the Congregation from 1976 through 1982 and remained a close collaborator with Cardinal Ratzinger on the Catechism of the Catholic Church.
Choosing the Archbishop of San Francisco would make good sense. I am not familiar with the Archbishop, but coming from a city like San Francisco and dealing with its liberal lifestyles, Levada should be familiar with dealing with such issues. Such experience would be essential as the guardian of the Faith.