Embattled World Bank President Paul Wolfowitz agreed to resign after weeks of controversy over his handling of a pay package for his girlfriend, a bank employee, the institution's board of directors announced.
In a statement announcing the decision Thursday, the bank said "a number of mistakes were made by a number of individuals" in the matter. Wolfowitz said the bank board accepted his contention that he acted "ethically and in good faith."
In a written statement, Wolfowitz said his eventual successor will his "full support." His resignation will take effect June 30. As the largest shareholder in the bank, the United States appoints its president. After the announcement, the White House said President Bush "reluctantly accepts" Wolfowitz's resignation and would announce a replacement soon.
Wolfowitz said it is "necessary to find a way to move forward. To do that, I have concluded that it is in the best interests of those whom this institution serves for that mission to be carried forward under new leadership." (Wolfowitz's resignation statement)
"Change should not be feared, it is something to welcome. It is the key to keeping this important institution relevant and effective in the future and meeting the needs of the world's poor, and of humanity as a whole," the statement said.
Wolfowitz was appointed to the World Bank post in 2005 after serving as deputy U.S. defense secretary, where he was one of the leading architects of the 2003 invasion of Iraq.
The World Bank Group Staff Association -- which had previously called for Wolfowitz's resignation -- said in a statement he had done "the necessary thing" by resigning.
But, they said, Wolfowitz should not remain as president through June.
"He has damaged the institution and continues to damage it every day that he remains as its president. ... He has demeaned the bank, insulted the staff, diminished its clients and dragged this institution through the mud. He put his own interests before those of the institution. In making a statement of gratitude to Mr. Wolfowitz, the board has done the same," the staff association said.
A World Bank committee concluded Wolfowitz violated staff rules when he arranged a raise and transfer for his girlfriend, Shaha Ali Riza, a longtime bank employee. After Wolfowitz took over at the bank in 2005, Riza was transferred to a U.S. State Department job at a tax-free government salary of almost $194,000 a year. (Watch how Wolfowitz is criticized in an internal World Bank report ) Wolfowitz, the White House and bank officials held talks Wednesday afternoon to work out details of his resignation. Wolfowitz's lawyer, Bob Bennett, had left the door open for departure if Wolfowitz wasn't singled out for blame.
"He will not resign under this cloud and that remains his position," Bennett said Wednesday.
In its statement, the board praised Wolfowitz's work on anti-poverty and anti-corruption programs.
"Mr. Wolfowitz has stressed his deep support for and attachment to the World Bank and his responsibility, as its president, to act at all stages in the best interests of the institution," directors said. "This sense of duty and responsibility has led him to his announcement today." (World Bank's statement) Wolfowitz, in his statement, said: "Hopefully the difficulties of the last few weeks can actually strengthen the bank by identifying some of the areas of governance and human resource management where reform is needed."
Earlier Thursday, Bush sounded as if he was resigned to the fact that Wolfowitz's tenure was coming to an end.
"I regret that it has come to this," he said. "I admire Paul Wolfowitz. I admire his heart, and I particularly admired his focus on helping the poor."
Bush applauded Wolfowitz for having made sure the bank "focused on things that matter -- human suffering, the human condition."

Mr. Wolfowitz has certainly done an admirable job leading this organization and it appears that many people are divided on the issue - some want him to stay while others think he should have resigned a while ago. Either way, a replacement will be named and the organization will be up and running in no time.