By Amie Parnes - 01/10/12 12:38 AM EST
White House Chief of Staff Bill Daley will step down from his post at the end of the month, President Obama announced Monday.
Daley will be replaced by Jack Lew, head of the Office of Management and Budget (OMB).
Announcing the staff change, Obama thanked Daley for his service and said he didn't accept his resignation right away.
"In fact, I asked him to take a couple of days to make sure that he was sure about this. But in the end, the pull of the hometown we both love, a city that has been synonymous with the Daley family for generations, was too great," Obama said while standing in the State Dining Room beside Daley and Lew.
"Bill told me that he wanted to spend more time with his family, especially his grandchildren, and he felt it was the right decision," Obama said.
The departure comes two months after the White House announced that Pete Rouse, the president’s senior adviser, would be taking over the daily operational duties.
Daley had previously vowed to stay on at the White House through the 2012 election. In an interview with NBC Chicago in October, Daley had he "made a commitment to the president through his reelection, which I'm confident he will do, and then my wife and I will return to Chicago."
Daley will serve as co-chairman of Obama's reelection campaign after he leaves the White House, sources confirmed to The Hill.
The president credited Daley with "extraordinary" work during one of the "most consequential" years of his presidency, including the raid on Osama bin Laden's compound, the troop withdrawal from Iraq and the passage of trade agreements with South Korea and Colombia.
The president said he consulted Daley about his replacement as chief of staff and found there was "one clear choice" in Lew.
"[I have] every confidence that Jack will make sure we don't miss a beat and continue to do everything he can to secure our economy, help the middle class and keep America safe," Obama said.
Daley submitted his letter of resignation to Obama last week.
"I have been honored to be a small part of your administration," he wrote to the president in a letter obtained by the Chicago Tribune. "It’s time for me to go back to the city I love."
In a letter to staff, Daley said it had been a "rare privilege to work with such an accomplished, competent, and dedicated team, and I will never forget our work together on behalf of the American people. I feel lucky to have been your colleague, and I thank you."
Daley has had a turbulent tenure at the White House, where he has reportedly clashed with other officials. He also has had a cool relationship with House Democrats, including Senate Majority Leader Harry Reid (D-Nev.).
Sources on Capitol Hill and at the White House say Lew will help smooth out some tensions that were created under Daley, who one aide called "a Washington outsider with little understanding about the way the Beltway works."
"He lacked insight on some pretty basic things," said one Democratic Hill aide. "I never thought I'd say this but you almost need to be a Washington insider to have that job or it just doesn't work."
On the other hand, "Everyone really likes and respects Jack," said one former administration official. "He's not only insanely smart. He's very personable."
"He's the consummate miracle worker on a host of flash points and really has the respect and trust of a lot of staffers," another former administration official said. "He comes in with tremendous bona fides. People will respond to his leadership."
"If you have a good reason to see him, you'll have a good audience with him," the former aide added.
Still, Daley's departure doesn't exactly come at the best time for Obama, who is beginning his reelection bid. The news presented a double whammy for White House aides who have been dealing with a new book highlighting tension in the West Wing.
"It's probably not the best time for the administration politically — especially during the election," said another former administration official.
Some say there was a level of unhappiness with Daley in recent months, and the grumbling had intensified since then. One former Obama aide who has dealt with Daley called him "unapproachable" and "standoffish."
"He's a little too structured," the aide said, adding that the chief of staff had some difficulty adjusting to the string of moving targets that is commonplace around the West Wing.
The aide said that while Rahm Emanuel, Obama's first chief of staff, would openly call on staffers in meetings, Daley would come in with a list of staffers who would speak in meetings.
"He has definitely ruffled a few feathers," the aide said.
Obama, on the other hand, said he's going to "deeply miss" having Daley at the White House. The president said he will continue to seek advice from him "in the months and years to come."
"Chicago is only a phone call away," he said.
Daley only had been Obama's chief of staff for a little more than a year. He replaced Emanuel, who left the White House and was elected mayor of Chicago.
Obama's appointment of Daley — a former bank executive and Commerce secretary — was widely interpreted as an olive branch to the business community, which had been vocal about its unhappiness with the administration and its legislative agenda.
But the business-friendly moves taken with Daley at the helm, including a push to pare back burdensome regulations, angered many on the left, who complained the president had lost his way.
Daley had recently been having "listening sessions" with former Obama aides and strategists to get their ideas on what the White House could be doing better.
Lew — who also served as OMB director in the Clinton administration — has extensive experience in government and in the private sector and is well-regarded by both parties on Capitol Hill.
— This story was posted at 2:13 p.m. and last updated at 7:38 p.m.
Daniel Strauss contributed to this report.