The Obama administration raised the ire of House Republicans earlier this month when it announced that the census director would report directly to the White House, rather than to the commerce secretary.

Gregg is the second Commerce nominee to withdraw in recent weeks. New Mexico Gov. Bill Richardson (D) stepped down last month due to an ongoing campaign finance investigation.

Turns out that assembling a cabinet is no easy task, even for a president with a 69 percent approval rating.

UPDATE: Here’s White House Press Secretary Robert Gibbs’ statement on Gregg’s withdrawal:

“Senator Gregg reached out to the President and offered his name for Secretary of Commerce. He was very clear throughout the interviewing process that despite past disagreements about policies, he would support, embrace, and move forward with the President’s agenda. Once it became clear after his nomination that Senator Gregg was not going to be supporting some of President Obama’s key economic priorities, it became necessary for Senator Gregg and the Obama administration to part ways. We regret that he has had a change of heart.”

This tax-evasion revelation comes on the heels of similar scandals that have embroiled Treasury Secretary Timothy Geithner and health czar-designee Tom Daschle. While Killefer’s post is not as high-profile as Geithner’s or Daschle’s, its central focus is fiscal responsibility. A lack of such discipline in Killefer’s personal life would reflect poorly on her integrity for the job.

If her case were an isolated one, she might be able to push through with an apology, as Geithner has and Daschle likely will. But now that a pattern has formed, she appears to be the proverbial straw that broke the camel’s back.

She is the second Obama nominee to withdraw her name. New Mexico Gov. Bill Richardson gave up his commerce secretary nomination amidst a federal investigation into his dealings with a California financial company contracting with the state government.

UPDATE: From the White House, here’s Killefer’s letter to Obama:

February 3, 2009

Dear Mr. President,

I recognize that your agenda and the duties facing your Chief Performance Officer are urgent. I have also come to realize in the current environment that my personal tax issue of D.C. Unemployment tax could be used to create exactly the kind of distraction and delay those duties must avoid. Because of this I must reluctantly ask you to withdraw my name from consideration.

I am deeply honored to have been selected by you and you have my deep appreciation for your confidence in me. You have my heartfelt support and best wishes for success in all your endeavors.

Respectfully yours,

Nancy Killefer

“The Governor is fully supportive of Dave Contarino and is confident that he always acted ethically and appropriately during his time as chief of staff. Dave was a key part of the progress in New Mexico under Governor Richardson’s leadership.”

As NMI’s Trip Jennings explains, Contarino is the subject of a federal probe examining the possible “pay-to-play” scheme that prompted Richardson to withdraw his nomination for secretary of commerce in the Obama administration.

You can follow NMI’s ongoing coverage of the investigation here.

I should be clear: This is a conservative movement meme, not something the Republican Party takes seriously. I’d noticed the same thing that the Wall Street Journal reports about Richardson and his (now-moot) Senate confirmation process: Republicans didn’t really care about his scandal, and didn’t think it would derail him. They’re training their guns on Eric Holder and (to a lesser extent) the Clintons.

“Obama will have a botched nominee after all,” tweeted Patrick Ruffini, the NextRight co-founder and former Bush-Cheney ’04 webmaster. “Thought he wouldn’t.”

The meme is catching on in the blogs. “Thus far, the Obama transition looks pretty shaky,” blogged Ed Morrissey of HotAir on Sunday. “One has to wonder what kind of vetting the Obama transition team has done with the marquee selections, and how badly they’ll bungle the rest.” Brent Baker, a blogger for the Media Research Center, fretted that the mainstream political press was covering for Obama by calling Richardson a “distraction.”

John Hinderaker of Powerline cut a little bit closer to the meme. “It is safe to say,” he blogged, “that the Democrats’ image as the ‘culture of corruption’ party continues to grow.” That’s what The Washington Times‘s Donald Lambro started arguing three whole weeks in a column about the “taint of scandal” defining the party. Obama, conservative bloggers like to point out, is the “first president-elect to meet with federal investigators.” He was cooperating with them to nail a Democratic governor, sure, but still…well…scandal!

The twist? This scandal involves New Mexico Gov. Bill Richardson, whom President-elect Barack Obama tapped as his choice for commerce secretary. Richardson withdrew his nomination for the post Sunday, citing an ongoing federal probe examining the state’s dealings with a California financial company that made large donations to a pair of political action committees founded by Richardson.

From The Washington Post:

A grand jury in Albuquerque is looking into whether CDR Financial Products received a contract with the New Mexico Finance Authority because of pressure from Richardson or other state employees. CDR made $1.48 million advising the authority on interest-rate swaps and refinancing of funds related to $1.6 billion in transportation bonds, state officials confirmed.

The Beverly Hills-based firm and its president, David Rubin, together gave $100,000 to Sí Se Puede and Moving America Forward, both PACs started by Richardson, shortly before winning the lucrative state contract, records show. [...]

CDR’s selection drew FBI interest because the firm did not make an initial list of the most qualified bidders. The bidding was reopened for review, and a state committee headed by one of Richardson’s former top aides later helped select CDR.

A legal source familiar with the investigation said yesterday that FBI agents, working on the Senate’s behalf and conducting a background check of Richardson for the Commerce job, conveyed to Obama’s transition team the seriousness and significance of the Albuquerque grand jury probe.

The agents are said to have communicated that the governor’s top aides — and even Richardson’s actions — were under scrutiny. At least two sources familiar with the investigation said some evidence raises concern about the propriety of the Richardson administration’s interactions with a donor.

The New Mexico Independent, TWI’s sister site, has been following the investigation since August and shares a few more details about the PAC donations.

[I]n 2003 and 2004 CDR Financial gave $75,000 to Richardson’s political action committee Si Se Puede!, and the company’s head, David Rubin, gave $25,000 to Moving America Forward, another Richardson PAC.

Richardson formed Si Se Puede! to pay travel expenses for him and staffers who were attending the 2004 Democratic National Convention, which he chaired. Moving America Forward was a voter-registration group.

Si Se Puede!, according to a 2004 Associated Press article, raised $191,000. Of that, $130,000 — including the $75,000 from CDR Financial — came from companies working on the GRIP bonds.

According to The New Mexico Independent, Richardson and his staff have largely remained mum about the investigation, until yesterday.

As The Washington Post points out, Richardson’s withdrawal from consideration for a cabinet post raises questions about the thoroughness of the Obama transition team’s vetting process.

The New Mexico investigation had been publicized since the summer, yet aides to the president-elect said yesterday that they were not aware of the matter when Richardson was nominated. Richardson advisers insisted that the governor had relayed information about the investigation to transition officials before his name was announced.

The episode provides another early embarrassment for the incoming administration — it now has the dubious distinction of being touched by two Democratic pay-to-play investigations — but it doesn’t appear to pose any lasting harm to Obama.

Richardson, on the other hand, may have more to worry about. According to The Post, his spokesman said Richardson “was hopeful that his name would be cleared and it would be wrapped up before his confirmation hearing,” and Richardson decided to withdraw when it became clear it would not.

Perhaps this is the case, but even if Obama’s team didn’t know about the investigation before Obama made the nomination, Richardson certainly did. Cynics can be forgiven for speculating that Richardson’s decision might be indicative that the tenor of the probe has become more serious and Richardson could be withdrawing now to spare the new administration a larger headache in the future. Whatever the truth, it appears likely that we haven’t heard the end of this story.

President-elect Barack Obama will nominate New Mexico Gov. Bill Richardson as Commerce secretary tomorrow at an 11:40 a.m. EST news conference in Chicago, according to a transition source.

Mystery solved.