Obama surprised by Daley’s resignation, says news ‘was difficult’

Chicagoan Bill Daley is stepping down as White House chief of staff, making way for budget director Jack Lew to take over the president’s team as it heads into a tough election year. President Obama told reporters this afternoon that Daley’s resignation was “not easy news to hear” and that he didn’t accept the decision right away.

“I asked him to take a couple of days,” Obama said, adding that “the pull of the hometown we both love” ultimately won out.

The shift from Daley to Lew will take place at the end of this month. Lew will complete the budget proposal and Daley will oversee crafting of the State of the Union address due in two weeks.

As a veteran of the White House, Capitol Hill and State Department, Lew will try to navigate tough budget and economic issues with Congress this year.

Having a strong team captain who can deal with lawmakers, staffers and business leaders is considered crucial to the White House strategy.

But White House officials say Obama had faith in Daley to lead that effort. As he addressed reporters in the State Dining Room this afternoon, Obama spoke somberly about the departure.

“Bill has been an outstanding chief of staff during one of the busiest and most consequential years of my administration,” Obama said. The news “was difficult for me,” he said.

Daley’s letter took the president by surprise, according to several accounts from White House officials.

In October, it seemed Daley was in for the long haul. He told Chicago reporters he was looking forward to returning to his hometown but that he would serve the president through the duration of the reelection campaign.

It had already been a grueling year for Obama, including a tough summer of fighting with Republicans over the debt ceiling and related budget issues. Some Democrats on Capitol Hill disliked how Daley handled those talks with House Speaker John A. Boehner (R-Ohio) and his House Republicans.

They were mollified by a November change in the flow chart at the White House, which kept Daley in charge but shifted many of the day-to-day operational duties over to Peter Rouse, who had served as the interim chief of staff. Daley narrowed his focus to serving as a high-level manager and advisor to the president.

White House staffers took a holiday break feeling good about their end-of-year victory in the extension of the payroll tax cut.

Daley went to Mexico and to Chicago to spend time with his wife and grandchildren. But when he came back, he asked to talk with the president right away. In a meeting Tuesday, he said he had decided to leave.

“I have been honored to be a small part of your administration,” Daley said in his letter, dated Jan. 3 and obtained by the Los Angeles Times/Tribune bureau in Washington. “It is time for me to go back to the city I love.”

The president asked Daley to take 24 hours to think it over before accepting the letter. Daley returned the next day to make it official.

“It was surprising to all of us,” said one senior official. “We’ve had a good run here.”

But Daley said he had done some soul-searching, said one advisor, and had clearly “made up his mind.”

In the Wednesday conversation, the officials said, Daley suggested to Obama that Lew be appointed to serve as his replacement.

Rouse had previously made it clear he didn’t want to serve in the top position, advisors said, and the president didn’t consider anyone other than Lew for the job.

Lew served as budget director under President Clinton, and as deputy director of the Department of State under Hillary Rodham Clinton before taking the budget job in the current administration.

He has extensive experience on Capitol Hill, where he was senior policy advisor to Speaker Tip O’Neill.

In addition, he was chief operating officer of global wealth management at Citigroup Inc.

christi.parsons@latimes.com