The news that Rep. Barney Frank will retire at the end of his term in 2012 sets off an internal scramble among Democrats to succeed the longtime Massachusetts lawmaker as the ranking member on the Financial Services Committee.

Since 2003, Frank has served as the top Democrat on the powerful 61-member panel, the second-largest of the House’s 20 standing committees. (Armed Services is the largest, with 62 members.) The committee has broad oversight over the banking, housing, insurance and securities sectors as well as over federal monetary policy and international finance.

The Democratic Steering and Policy Committee typically nominates members for the next Congress’s committee posts during the previous Congress’s lame-duck session. The full Democratic caucus then votes to confirm the nomination.

View Photo Gallery: The former chairman and current ranking member of the House Financial Services Committee announced he will not seek reelection after 16 terms in office.

While most congressional committee spots are typically determined through the seniority system, the task of determining Frank’s successor is not likely to be a simple one.

Rep. Maxine Waters is next in line to succeed Frank as ranking member on the panel. But the California Democrat is under investigation by the House Ethics Committee over allegations that she improperly sought federal aid for a bank in which her husband was a large investor. That could complicate her path to the ranking member spot.

A ruling by the committee is expected before the end of the current Congress; Waters in July argued that the case should be dismissed in the wake of reports that the investigation may have been compromised by the panel’s staffers.

Should the committee’s investigation reflect unfavorably on Waters – or should the ethics case remain unresolved — House Minority Leader Nancy Pelosi (D-Calif.) could decide to step in and tap another Democrat for the ranking member spot.

Pelosi and other Democratic leaders have made such moves in the past; last December, for instance, Pelosi and then-Majority Whip James Clyburn (D-S.C.) urged Rep. Edolphus Towns (D-N.Y.) to step aside in the race for ranking member on the House Oversight Committee. Rep. Elijah Cummings (D-Md.) went on to best Rep. Carolyn Maloney (D-N.Y.) for the nomination of the Steering Committee and was later approved by the entire House Democratic Caucus.

Next after Waters among Democrats on the Financial Services panel is Maloney, followed by Reps. Luis Gutierrez (Ill.), Nydia Velazquez (N.Y.) and Mel Watt (N.C.).

Pelosi’s office did not respond to a request for comment on the ranking member race. But if she and other Democratic leaders decided to reach past Waters, matters of race and personal alliances could come into play: Waters and Watt are members of the Congressional Black Caucus; Gutierrez and Velazquez are on the Congressional Hispanic Caucus; and Maloney is a close Pelosi ally.

A move by Democratic leaders to tap Maloney for the ranking member spot could anger CBC members. Those tensions could be resolved by tapping Watt, but that would involve skipping over two CHC members who are ahead in seniority.

Frank himself could also get involved in the race by weighing in on who he’d like to see as his successor. Frank’s office has said that the congressman will make no public comments until a news conference scheduled for 1 p.m.

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