The resignation of RNC chief of staff Ken McKay on Monday made him the highest-profile official to depart the central committee after the revelation that the committee had picked up a nearly $2,000 tab at a sex-themed California night club. The incident proved embarrassing and a midlevel staffer was dismissed, a move that was not enough to assuage social conservatives urging a fundraising boycott.
The incident comes as Republicans are gearing up for November elections in which they hope to loosen Democrats' grip on Congress, where President Barack Obama's party holds a majority in both chambers.
In an internal memo Monday, Steele said he and his staff had "the responsibility to assure our donors, volunteers and voters that it's nothing but our core mission which drives every dollar we spend, every phone call we make, every e-mail we send and every event we organize. Recent events have called that into question. The buck stops with me. That is why I have made this change in management."
Steele was not present at the Voyeur Hollywood West on Jan. 31 when a group of young Republicans ran a tab picked up by the RNC. After reporters noted the bill in a funding report, the RNC fired a staffer it blamed for the outing and said it would be reimbursed by a donor who had attended.
Steele had insisted earlier Monday that he would not resign and defended his stewardship of party affairs. He dismissed criticism - some of it has centered on spending on flights, limousines and high-dollar hotels - as the talk of Republican figures uncomfortable with his "streetwise" managerial style.
Asked in a nationally broadcast interview if he would step down in the face of criticism of the party's financial management, Steele replied, "No." He said some people had been second-guessing him "since the day that I got the job."
That confidence was not extended to McKay. As the chief of staff, he ran day-to-day operations at RNC headquarters and was the top aide to a chairman who found few defenders.
Steele replaced McKay with Mike Leavitt, who joined the RNC as deputy chief of staff two months ago. He ran Steele's losing Senate campaign in 2006 and is close to the chairman. He also helped Virginia Gov. Bob McDonnell win election last year.
Steele has faced mounting criticism and pressure. A top congressional Republican said Sunday the RNC must be held accountable for the way it uses the money it raises in light of the much-criticized Hollywood outing.
"This kind of thing has got to stop or they won't get any contributions," said Sen. Jon Kyl, the No. 2 Republican in the Senate.
Meanwhile, former House Speaker Newt Gingrich called on fellow Republicans to stop criticizing Steele and focus instead on defeating Democrats in the November congressional elections.
"It's foolish for Republicans to focus on Michael Steele as a person and it's better to focus on Democrats," Gingrich told NBC television Tuesday.
But Gingrich, who figures prominently in speculation about the 2012 presidential race, also suggested that the embattled party chairman appoint an outsider to bring the party's finances under control.
Even as Steele and the national committee are being criticized for lavish spending habits, Steele has hired a special finance assistant who himself was fined by the District of Columbia three years ago for improperly spending money from a political action committee, according to published reports. The special assistant, Neil Alpert, will help with fundraising, The Washington Post reported Monday.