"In the long sweep of American history there are moments for each elected public official to step aside and let someone else step up. This is my moment to step aside," Dodd said at a press conference outside his Connecticut home today.
Dodd faced a 40 percent job approval and his chance at re-election was written off by many Democrats. He was widely viewed as the most vulnerable statewide Democratic incumbent in the country and some say that by removing himself from the equation, he will provide a good opportunity for Democrats to hang onto that Senate seat.
But today, the longtime senator pushed back against speculation about his viability as a candidate and staunchly defended his public service record, calling any predictions about an election defeat or victory "absurd."
"I'm very proud of the job I've done and the results delivered," Dodd told reporters. "But none of us is irreplaceable. None of us are indispensable, and those who think otherwise are dangerous."
Dodd has spent much of the last year at the center of high-profile issues, including the ongoing health care overhaul and financial regulatory reform.
Today, he acknowledged the challenges of dealing with those highly partisan issues and the impact of his battle with cancer, as well as the deaths of his sister and the late Sen. Ted Kennedy.
"Strange as it may sound, I'm not confident that I would be standing here today making this announcement if these situations had not occurred," said Dodd, describing how he thought about his decision not to run while standing at Kennedy's grave site on Christmas Eve."Together these challenges have given me pause to take stock and to ask questions that too few of us in elected public life ever do: Why am I running?"
Dodd reminded people today that although he will not seek re-election, he still has another year to complete in the Senate. ABC News has learned that Dodd intends to stay on as chairman of the Senate Banking Committee until the end of his term. After he leaves, the senator next in line to replace him as head of the panel is Tim Johnson of South Dakota, who suffered a stroke in 2006.
Connecticut's Attorney General Richard Blumenthal is the top choice among Democrats to replace Dodd.
President Obama today released a statement praising Dodd's career.
"From his time as a young Peace Corps volunteer to his five terms in the United States Senate, Chris Dodd has devoted his life to public service," the president said. "While his work in the Senate is not yet finished, his leadership in that institution will be missed."
Dodd's announcement comes on the heels of Sen. Byron Dorgan's, D-N.D., surprise decision to retire instead of seeking re-election this year. Democrats also lost two embattled gubernatorial candidates in Colorado and Michigan yesterday.
Between Dodd and Dorgan -- whose decision not to seek re-election was less expected and far worse for Democrats -- Republicans are gearing up for a competitive mid-term election. Many are confident that between the House, Senate and key gubernatorial races, they will be able to surpass Democrats.
"I think we're going to take back the House this year," the ranking Republican on the House Homeland Security Committee, Rep. Pete King of New York, said on "Good Morning America" today.
Chris Dodd Won't Seek Re-election
When Dodd steps down at the end of his current term, it will represent the departure of one of the most powerful lawmakers on Capitol Hill -- if not the most powerful -- on financial issues.
The Connecticut senator is the chairman of the Senate Banking Committee, a panel currently holding the key to financial regulatory reform efforts. While the House has already passed its version of the bill, the Senate has yet to move its measure out of the banking committee.
Dodd's departure will have strong implications for the ongoing push to overhaul the financial system in the wake of the worst crisis since the Great Depression, but what impact remains to be seen.
A key facet of Dodd's proposed financial reform bill is a drastic reduction in the power of the Federal Reserve. The central bank has been blamed by some critics for not doing a good enough job protecting consumers from the financial industry.
A source in the financial industry told ABC News Wednesday that Dodd's departure will be viewed as a positive by the industry, which has opposed a number of measures he has proposed.
"It's a good thing because politics were driving a lot of his decisions, rather than economics," the source said. "Without the politics, he's left to economics and hopefully the bipartisan bill will be easier to achieve because the focus will be not on what's best for the re-election of a senator, but rather modernizing the regulatory system.
"If he were running for re-election, he'd be more likely to be more populist. Now that he's not, he doesn't have to be that populist as it relates to regulatory reform. His populist trend will not continue," the source added. "The political pressures associated with re-election are off the table, it's out, he's beholden to no one."
The White House today was hesitant to weigh in on what Dodd's departure would mean for the fate for financial regulatory legislation in the Senate.
"Knowing Sen. Dodd and the passionate advocate that he is, I think he will continue to work hard and want to get this done by the end of this year, as the president does, too," White House press secretary Robert Gibbs told reporters today.
Dodd was involved in one of the biggest scandals in the recent financial crisis. He was one of several lawmakers cited as participating in the "Friends of Angelo" scheme, which involved members of Congress and other federal officials allegedly receiving sweetheart loan deals from former Countrywide Chief Executive Angelo Mozilo. Last year Mozilo became the highest-profile executive to date to face charges when the Securities & Exchange Commission in June accused him of insider trading.
The subprime lender was taken over by Bank of America last year amid growing losses in Countrywide's loan portfolio. Bank of America received a $45 billion bailout by the U.S. Treasury.