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Tom is German-Irish and we all know how much of a peace-loving bunch they all are and not prone to quarrel.
Mario Puzo frequently said that one of his favorite lines was "a lawyer with his briefcase can steal more than a hundred men with guns", which he wrote in as being frequently cited by Vito. Vito desperately wanted his family and his business to be completely legit. Hagen's immense prowess in this area was far more valuable, in hie eyes, than that of a traditional mafia counselor. He was to be a far more intrinsic and involved player in what Vito saw as a less barbarous future.
Plus, the other families had lost respect for the Corleones, partly for having a non-Sicilian consigliere, which is actually a more traditional figurehead position, less a counselor (in spite of the title) to the Don than a companion and sounding board, and a representative in certain adjudicating functions. To choose a non-Sicilian was deemed, by the other families, disrespectful to the tradition. In the book, a few days after that meeting, Vito asks Tom if he figured out why he and Michael wanted him removed from the action. He smiles and mentions that at first he questioned things, but says he then "put on (his) Sicilian hat, and figured it out".
In the book, both Vito and Michael had no doubt of Hagen's abilities as a "wartime" consigliere, but he was simply too valuable to the family to be left in a risky and visible position. Notice in GF2 how he has regained a position within Michael's inner circle, even more valuable to the families legitimate holdings. He is kept at arm's length from any criminal machinations, though, as indicated by his dismissal from the room at their meeting with Johnny Ola. It is similar to how Michael was treated by Sonny, before Michael killed Solozzo. It is more an indicator of desire to protect than a lack of confidence. It is only after the attempted assassination of Michael, in his home, that he feels it's necessary to bring Hagen back into the loop regarding "family" business. Again, not unlike Sonny reluctantly did with Michael in the first movie.
As an aside, the new book, The Family Corleone, is damn good, especially for Godfather junkies. It's a look at the events leading up to the first book/movie. Interesting revelations about Hagen, Luca Brasi, Barzinni, even Frank Pentangeli and the Rosato Brothers, who figure prominently in the GF2. Modeled loosely on the Castellammarese War in the early Thirties. Vito seems to be modeled, in this book, on Joseph Bonnano more than Carlo Gambino or Frank Costello, who are mentioned as the more likely inspirations for him in the original novel.