Jan. 6 (Bloomberg) -- Christopher Dodd’s departure from the Senate this year may help the lawmaker push the revamp of U.S. financial rules without being distracted by a tough re-election campaign.

Dodd, a Connecticut Democrat and Senate Banking Committee chairman who trails Republican Rob Simmons by as much as 11 percentage points in polls, also may act more aggressively on rewriting the rules as a legacy of his 29-year Senate career. Dodd will remain chairman this year.

“If he’s not in the middle of an intense campaign, Dodd will have more opportunity to focus on regulatory reform legislation,” said Floyd Stoner, a lobbyist for the American Bankers Association, a Washington-based trade group representing interests of U.S. banks as Congress writes rules.

The 65-year-old Dodd announced today he won’t seek re- election, saying that in the past year he found himself “in the toughest political shape of my career.” Dodd was faulted in 2007 for neglecting his duties as committee chairman while seeking the Democratic presidential nomination during the collapse of the subprime-mortgage market.

Dodd, who became chairman in 2007, is crafting financial rules legislation with the committee’s top Republican, Senator Richard Shelby of Alabama. The House of Representatives last month passed its version of the legislation, which President Barack Obama last year set as a top priority.

“Dodd has said all along that he views getting financial regulatory reform done as a legacy issue,” said Mark Schuermann, senior vice president for government relations at the Financial Services Forum, a Washington-based trade group made up of the chiefs of the largest financial firms.

Dodd Draft Rejected

Dodd’s November draft legislation to create a Consumer Financial Protection Agency, a single bank regulator and an agency to monitor systemic risk ran into Republican opposition. Shelby objected to a stand-alone consumer agency and Republican Bob Corker of Tennessee said the bill wasn’t “amendable.” Dodd has asked four teams of committee members to craft a new proposal to resolve Republican concerns.

Still, the decision to step down later this year may weaken Dodd as he seeks concessions.

The retirement “may embolden the Republicans to try to stall reform, wait Dodd out and hope for a more Republican- friendly Senate after the election where they would have a stronger negotiating position,” said Camden Fine, president of the Independent Community Bankers of America.

Peter Wallison, a fellow specializing in financial policy at the Washington-based American Enterprise Institute, said Dodd’s decision could slow or terminate overhaul efforts.

“It would substantially reduce the prospects for compromise legislation,” Wallison said in a telephone interview. “Dodd as a lame duck has substantially less power to get compromises done.”

Dodd’s decision won’t thwart efforts to pass legislation overhauling the rules because Obama and Democratic leaders are pushing to complete the process.

“I don’t think this will derail financial regulatory reform,” Schuermann said. “This is a top priority for President Obama. It is a top priority for Democratic leadership.”