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Daley stepping down as chief of staff

Bill Daley is stepping down as President Barack Obama's chief of staff.

The president made remarks from State Dining Room of the White House at 3:00 p.m. ET.

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. Watch President Obama's entire statement.

Budget Director Jack Lew will replace Daley. The change will be effective at the end of the month.

One senior administration official tells NBC News that Daley offered his letter of resignation to the president last Tuesday and Obama asked him to think about it. Daley returned on Wednesday and re-affirmed his decision to leave Washington and return to his hometown of Chicago.

"Obviously this was not easy news to hear," said Obama on Monday. "But in the end, the pull of the hometown we both love ... was too great."

The president added, "Chicago is only a phone call away."

Obama selected Daley for the post in January of last year. He's the brother of retired Chicago Mayor Richard M. Daley and the son of legendary Windy City Mayor Richard J. Daley.

Obama praised Daley's "extraordinary work" and said "no one in my administration has had to make more decisions, more quickly, than Bill."

Obama said he and Daley believe Lew to be the "clear choice" to serve as the next chief of staff.

*** UPDATE *** NBC's Kristen Welker has additiona reporting:

In the wake of this summer's debt-ceiling debate -- which left all sides battered -- Beltway insiders started to question whether Daley was the right fit for the job. Some aides on the Hill complained that they didn't feel as though they had a strong line of communication with Daley. 
In October, Daley openly complained about Congress during an interview with Politico; "Both Democrats and Republicans have really made it very difficult for the president to be anything like a chief executive," Daley said, "this has led to a kind of frustration."  Daley also insisted he would stay with the president through the re election year. 

But eyebrows were raised again in November when the White House announced Pete Rouse, a senior Obama aide, would take on an expanded role within the administration, essentially sharing some of the tasks that had initially fallen under Daley's purview. 

According to several senior administration officials, Daley went home during the holidays and realized he wanted to permanently return home to Chicago. Officials say Daley offered his letter of resignation to President Obama last Tuesday. Surprised, the president told Daley to think about it for 24 hours. Daley did exactly that, but returned with his letter of resignation the following day saying that he was certain about his decision to return to Chicago.

Senior administration officials say Daley recommended that the current Budget director, Jack Lew, replace him and the president agreed. Daley will become a campaign co-chair when he returns to Chicago.