President Obama said Monday that White House Chief of Staff Bill Daley is stepping down at the end of this month and will be replaced by Jacob J. Lew, director of the Office of Management and Budget, who will lead the president's team in a difficult re-election year.
Mr. Daley delivered his letter of resignation to the president late last week, noting that it was time for him to return to his hometown of Chicago. The transition will occur late this month to allow time for Mr. Lew to finish the administration's budget proposal for Congress and allow Mr. Daley to help write the president's State of the Union address to Congress.
When Mr. Daley returned from spending time with his wife and grandchildren during the Christmas holidays, he informed Mr. Obama he had decided to leave. The president told Mr. Daley to take 24 hours to think about the decision, and Mr. Daley returned the next day with the same decision.
"Obviously this was not easy news to hear, and I didn't accept Bill's decision right away," Mr. Obama told reporters Monday afternoon. "In the end, the pull of the hometown we both love ... was too great.
"Bill has been an outstanding chief of staff during one of the busiest and most consequential years of my administration," Mr. Obama continued, thanking Mr. Daley for his "extraordinary service, extraordinary friendship and loyalty."
The news of Mr. Daley's departure did not surprise many political analysts after a difficult year for the White House marked by bickering with Republicans over the debt ceiling and by budget brinksmanship. In October, Mr. Daley told Chicago reporters that he was planning to return to his hometown but would serve Mr. Obama until the end of his re-election campaign.
The move comes after Mr. Obama announced a shift in Mr. Daley's responsibilities in November, keeping Mr. Daley in charge but handing day-to-day operational duties over to Peter Rouse, a longtime aide who had served as interim chief of staff.
Mr. Daley, who joined the administration in January, was supposed to narrow his focus to strategic managerial duties, in addition to advising the president and serving as a surrogate.
By tapping Mr. Lew, the president is elevating a veteran Washington staffer with experience in the White House, on Capitol Hill and at the State Department. Mr. Lew, 56, served as OMB director under President Bill Clinton and as deputy director of the State Department under Hillary Rodham Clinton.
He also spent years on Capitol Hill, most notably as a senior policy adviser to Speaker Thomas P. "Tip" O'Neill Jr.
Immediately before joining the Obama administration, Mr. Lew served as the managing director for Citigroup Inc.'s alternative investments.
"Here in Washington, I have every confidence that Jack will make sure we don't miss a beat," Mr. Obama said.
Before joining the White House, Mr. Daley was an executive for JP Morgan Chase, chaired former Vice President Al Gore's presidential run in 2000 and served as commerce secretary during Mr. Clinton's administration.
When Mr. Daley was first named chief of staff, left-leaning government watchdog groups expressed disdain about his Wall Street connections. After Mr. Lew was tapped to replace him Monday, the groups voiced similar concerns about the OMB director's prior ties to the financial industry.
"It's vital that he not serve as a big business channel to the president in the way Daley did," Public Citizen's Robert Weissman said in a statement. "It's long past time for the Obama administration to abandon its unrequited affection for Wall Street and corporate America."
In 2010 Mr. Lew was forced to amend his personal financial disclosure filings after a Washington Times report raised questions about his eligibility for a nearly $1 million bonus from Citigroup weeks after the company was bailed out by taxpayers.
Mr. Lew, who was serving as deputy secretary of state at the time, amended one of his ethics filings. He had originally reported leaving his Citigroup job Jan. 5, 2009. Ten days later, Citigroup paid Mr. Lew a bonus of $940,000.
Such a timeline posed troublesome questions for Citigroup and Mr. Lew, Mr. Obama's nominee to replace Peter R. Orszag at OMB at the time. Under Citigroup policy, only current employees are entitled to bonuses.
When questioned by The Times about whether Mr. Lew received an exemption from the company's policy, administration officials said Mr. Lew left Citigroup on Jan. 16, 2009 — not 11 days earlier as he originally reported on his ethics form.
Mr. Lew's ascension to White House chief of staff leaves a power vacuum at OMB. Mr. Obama has yet to name a successor to Mr. Lew, and Republicans on Capitol Hill are already taking aim at his deputy, Heather Higginbottom, who is next in line to oversee the office.
Ms. Higginbottom assumed her role as Mr. Lew's deputy in October after the Senate blocked her nomination for 10 months. Sen. Jeff Sessions, an Alabama Republican and the ranking member of the Senate Budget Committee, took particular exception to Ms. Higginbottom during her confirmation hearing, assailing her lack of prior budget experience.
Before joining OMB, Ms. Higginbottom was a deputy policy adviser to Mr. Obama and served as a policy director for his campaign.
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