Obama chief of staff Bill Daley steps down, budget chief Jack Lew steps up

UPDATED 4:56 p.m. ET

With less than a year to go before voters head to the polls to decide whether President Obama deserves another term in office, White House chief of staff William Daley is stepping down at the end of the month, paving the way for budget director Jack Lew to take his place.

"Obviously this was not easy news to hear," Mr. Obama told reporters at the White House in the official announcement in the State dining room with both men at his side.

"Bill has been an outstanding chief of staff during one of the busiest and most consequential years of my administration," Mr. Obama said, adding that Daley said he wanted to spend more time with his family.

Daley was named chief of staff in early 2011 after serving as a top executive at JP Morgan Chase. Daley is the brother of former Chicago Mayor Richard M. Daley and the son of Richard J. Daley, the legendary mayor who ran the city from the mid 1950s through the mid 1970s. Daley replaced Rahm Emanuel, who left the White House for Chicago, where is now the mayor.

Daley has also served as Commerce Secretary under President Bill Clinton and was the campaign manager for then-Vice President Al Gore's run for the White House in 2000.

Jack Lew became director of the White House Office of Management and Budget in late 2010 after serving as a top official in the State Department under Secretary of State Hillary Clinton for the first two years of the Obama administration. Lew was also White House budget director in the final two and a half year of the Clinton administration. In the interim, Lew worked at New York University and Citigroup.

"Over the last year he has helped strengthen our economy and streamline the government at a time when we need to do everything we can to keep our recovery going," Mr. Obama said, noting Lew's history of public service, including time working for former House Speaker Thomas P. "Tip" O'Neill.

Mr. Obama said Daley recommended Lew as his replacement. Daley was not considered to be effective in dealing with lawmakers on Capitol Hill, a key role for the chief of staff.

Lew is well regarded on Capitol Hill. And the president's relationship with Congress could determine whether he wins or loses in November.

Facing tough re-election odds, Mr. Obama last week decided to pick a high-profile fight with Republicans by bypassing Congress when he named former Ohio Attorney General Richard Cordray to head the newly established Consumer Financial Protection Bureau.

And the White House and Republicans are on track for a bitter fight on extending a beyond February a payroll tax cut that affects more than 160 million Americans. Lew's role will be critical in that fight.

The move comes just two months after Pete Rouse, a senior adviser to Obama since his 2004 election to the Senate, took on an expanded operational role running the White House bureaucracy, a role traditionally taken on by the chief of staff. Rouse served as interim chief of staff after Emanuel left and before Daley joined the White House staff.

Daley submitted his resignation last week and Mr. Obama said he asked Daley to think it over before it would be official.

"I have been honored to be a small part of your administration. It is time for me to go back to the city I love," Daley wrote in his January 3 letter.