Britain's most senior counter-terrorism officer quit on Monday over his role in the telephone hacking scandal engulfing Rupert Murdoch's News Corp, plunging London police into chaos a year before the city hosts the Olympic Games.

Amid a growing war of words between police and the politicians and a feeding frenzy for heads to roll, London's Metropolitan Police said Assistant Commissioner John Yates, one of the capital's most senior officers, intended to step down.

The decision came a day after Commissioner Paul Stephenson said he would resign. It leaves the leadership of Britain's oldest and largest police force of some 32,000 officers in turmoil just a year before the London Olympics, the biggest security operation in its history.

Yates's cardinal error was his decision not to re-open the criminal investigation into phone hacking by journalists at the News of the World newspaper which led to the paper's royal reporter and a private detective being jailed in 2007.

There is absolutely nothing proven against the probity or the professionalism of either man, London Mayor Boris Johnson told reporters.

But in both cases we have to recognize that the nexus of questions about the relationship between the Met and the News of the World was likely to be distracting to both officers in the run-up to the Olympic Games.

Yates dismissed demands for a new probe in 2009 after just eight hours of reconsidering the case. Asked at a parliamentary committee hearing last week whether he had done the minimum necessary, he said: There's probably an element of that.

CRAP DECISION

A new probe launched in January this year found police had 11,000 pages of evidence which had not been thoroughly examined by detectives and Yates agreed his decision was a crap one.

The Metropolitan Police Authority said it had suspended Yates over allegations made against him, but the officer decided to jump before he was pushed.

This man (Yates) is right at the heart of all the problems with this, former deputy prime minister John Prescott, who says he was a victim of phone hacking, told BBC TV. He should have gone before.

Ordinary officers, already deeply unhappy at government plans to reform their pay and conditions, were said to be unimpressed with the attacks on the police by the media and politicians.

I know John Yates, I've worked with him, I know him personally. If he goes I think it will be an absolute tragedy, said Peter Smyth, chairman of the Metropolitan Police Federation which represents lower-ranked and ordinary officers in London.

He said it was becoming a witch-hunt.

Detectives are investigating not only the hacking claims but also allegations that a small number of officers were taking payments from journalists in return for information.

Rebekah Brooks, the former News of the World editor who ran Murdoch's British newspaper arm News International until her resignation last week, was arrested on Sunday by officers investigating both the hacking and bribery claims.

She told a parliamentary committee in 2003 that journalists had paid police for information in the past.

At the center of the scandal afflicting the Met is the suggestion that top officers and News International executives were too close.

Stephenson quit on Sunday over the Met's decision to hire Neil Wallis, a former deputy editor at the News of the World at the time of the alleged hacking and one of those to be arrested by the new inquiry team, as a PR adviser.

It later emerged he had accepted free treatment from a luxury health spa where Wallis also worked, although he strongly denied any wrongdoing.

Andy Hayman, the senior officer who headed up investigations into the 2005 London bombings and oversaw the original hacking probe, admitted he had dined with News International executives while the original police probe in 2006 was ongoing.

After leaving the police, he went to work for the Times newspaper, part of the News International stable. While admitting mistakes were made, officers have strongly denied any claims of impropriety.

They point out they were faced with some 70 live terrorism investigations, including a plot to blow up U.S.-bound airliners in mid-flight, and that was why the original inquiry was so limited.

Announcing his resignation, Stephenson also fired thinly-veiled criticism at Prime Minister David Cameron over his decision to hire former News of the World editor and Wallis's former boss Andy Coulson as his media chief.

PIRANHAS

If News International did the things that they are alleged to have done, it's disgusting and people should be called to account for it, Smyth told Reuters.

He compared critics calling for senior police heads to roll to piranhas in a feeding frenzy.

Professor Martin Innes, a leading criminologist based at Cardiff University, told Reuters the crisis was as damaging for police morale as any the Met had faced in recent times.

I know some of the officers on the ground will be just rolling their eyes at all of this and thinking what has this got to do with real policing, Innes said.

One source at the Met told Reuters: No one likes to work for an organization that is being criticized and scrutinized like this.

Mayor Johnson said authorities would move swiftly to replace Stephenson while Yates had already been replaced by Assistant Commissioner Cressida Dick.

She is no stranger to controversy herself, having headed an operation which led to an innocent Brazilian electrician being shot dead by police in July 2005 after he was mistaken for a would-be suicide bomber.

Changes at the top would not end the affair, one former police officer told Reuters.

The important questions remain: What were the News of the World and other newspapers doing in hacking and blagging? and why did public institutions for so long look the other way? the officer said.

Chief Constable of Yorkshire Police Norman Bettison, mooted as a possible replacement for Stephenson, said any corrupt police officer should be dealt with, but there was a sense that police wrongdoing provided a useful distraction for the media.

Those individuals are below contempt within the police service, he told Reuters in an interview last week, saying they were selling their soul to the devil.

This is not a systemic or universal issue. And it suits the press sometimes and particularly when they're under pressure to paint it as such.

(Additional reporting by Stephen Addison and William Maclean; Editing by Keith Weir and Paul Taylor)

Hacking