WASHINGTON — Veteran Rep. Barney Frank, D-Mass., an architect of the most sweeping financial reform legislation since the Depression and a muni bond investor, said Monday he will retire from Congress next fall and use his remaining time in office to defend the new law against Republican counterattacks.

The 16-term congressman said he based his retirement decision in part on legislative redistricting, which would have forced him to run in a new, more conservative district.

Frank, the former chairman of the House Financial Services Committee, helped pass last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act. The law ushered in sweeping changes to the municipal securities market, including restrictions on previously unregulated municipal advisors, who are now required to register with the Securities and Exchange Commission and adhere to a fiduciary duty, meaning they must put their clients’ interests ahead of their own.

In a press conference Monday announcing his decision, Frank, 71, said he plans to dedicate his remaining time in office, until his current terms expires in 2012, to combat Republican efforts to undermine Dodd-Frank.

“They will not go after financial reform head on,” Frank said. “They’re trying to go at it from side angles and I’m trying to prevent that from happening.”

As an example, Frank, the top Democrat on the committee, said House Republicans have fought increased funding for the Commodity Futures Trading Commission, which Dodd-Frank vested with authority to regulate swaps, including most muni-related swaps.

Asked if he has engaged in insider trading similar to allegations made against other lawmakers by “60 Minutes,” Frank also noted that he has “for some time,” invested almost exclusively in Massachusetts municipal bonds.

Frank owns muni bonds issued by the state and its authorities as well as bond funds that hold the debt.

His muni bonds were worth between roughly $940,000 and $2.26 million as of the end of May, according to disclosure reports he filed with the House clerk earlier this year.

Municipal market participants hailed Frank’s in-depth understanding of the market, even if they did not always agree with his views.

“I’m actually going to miss him,” said William Daly, senior vice president of government relations for the Bond Dealers of America. “People in the industry might not have always liked where he came out. But he’s smart and principled and he understood the industry.”

An industry group agreed, saying he deserves credit for spearheading recent market reforms, including a uniform rating scale for corporate bonds and munis, after complaining munis were rated on a separate, more rigorous scale despite having low default rates. He also pushed for an enhanced issuer-protection mandate for the Municipal Securities Rulemaking Board.

“I think that stuff has his fingerprints all over it,” said Michael Decker, managing director and co-head of the municipal securities division at the Securities Industry and Financial Markets Association. “In terms of the municipal market, that’s a big part of what he’ll leave behind.”

Frank’s departure could leave a void.

“He’s certainly been a [long-term] friend of state and local governments,” said Lars Etzkorn, program director of the Center for Federal Relations at the National League of Cities.

A consumer advocate, however, said many Dodd-Frank rules will be in place before Frank leaves Congress.

“If he’d retired after the end of the last term, that would have been a very different thing,” said Barbara Roper, director of investor protection at the Consumer Federation of America.

Several market participants said Rep. Maxine Waters, D-Calif., who ranks second behind Frank in seniority on the financial services committee, could serve as an advocate for investors, but they were unaware of her views about the municipal market.

Sources, who declined to speak for attribution, also noted that Waters is the subject of an ethics investigation into whether she helped land federal funding for a bank in which her husband owned stock and previously served as board member.

Waters has asserted she is innocent. The matter is being investigated by a private law firm, after two attorneys for the House Ethics Committee were placed on leave for mishandling the probe.

The inquiry could undermine her prospects of serving in a leadership role on the committee, even if Democrats remain in the minority after the 2012 elections, sources said.

Frank said he plans to write, teach, lecture and divide his time between Massachusetts and Maine. He began his career in the Massachusetts State House, where he served for eight years before winning election to the U.S. Congress in 1980.

Though observers often focus on Frank’s intellect and wit, as well as his capacity for barbs, one said his real contribution springs from his ability to compromise.

“He’s really a dealmaker,” Roper said. “That’s a rare skill in these increasingly polarized times.”

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