Politico

With several races still to be decided, Senate Democrats remain hopeful they can capture a filibuster-resistant 60-seat majority. But even if they don’t attain their goal this year, the 2010 midterm election appears to offer another excellent opportunity to hit the threshold.

The 2010 election could prove to be another punishing cycle for Republicans, who are again defending more seats than their Democratic counterparts: 19, compared with 16 Democratic-held Senate seats.

Of the Democratic districts, most are in states that Barack Obama won comfortably in the presidential election. By contrast, Republicans will be defending seats in tough battleground states, including Ohio (Sen. George Voinovich), New Hampshire (Sen. Judd Gregg), Florida (Sen. Mel Martinez) and Missouri (Sen. Kit Bond).

In two of the more promising states for Republicans — Arkansas and Colorado — the GOP talent pool is shallow.

Already, The Cook Political Report lists four Republican-held seats as “tossups” or in the “leaning Republican” category, while not a single Democratic seat is ranked in those categories.

Following is a list of Politico’s top 10 Senate races to watch for 2010.

1. Colorado

Sen. Ken Salazar’s victory in 2004 foreshadowed Colorado’s Democratic wave, which culminated in Obama’s statewide victory this year.

As Salazar seeks to win a second term, Republicans don’t have much of a bench to speak of. Former Rep. Bob Beauprez, who ran a lackluster campaign for governor in 2006, outgoing Rep. Tom Tancredo and state Sen. Josh Penry are all possible challengers.

2. Florida

Democrats view Martinez as the most vulnerable Republican in the Senate. After winning his Senate seat by a razor-thin margin in 2004, he has failed to make a name for himself, Democrats say — and public polling shows him with dangerously low approval ratings. Martinez remains a blank slate to many Florida voters, with many unfamiliar with his record — other than his short and controversial stint as RNC chairman. And his advocacy for immigration reform has angered conservatives. 

Further, the critical swing region in the state along the I-4 corridor has been trending in the Democrats’ direction, and Martinez can’t count on receiving the same support there that he received in 2004.

Because Martinez is viewed as a tempting target, there will likely be a crowded field of Democrats running. Leading the pack is the state’s chief financial officer, Alex Sink; state Sen.-elect Dan Gelber; and Frank Sanchez, head of the Obama campaign’s Hispanic outreach in the state.

Democratic Rep. Ron Klein’s fundraising skills make him another possibility — and he already has $1.8 million in his campaign account. But his weaker-than-expected victory in his home district raises questions about his statewide appeal.

3. Kansas

The jockeying has already begun to succeed Republican Sen. Sam Brownback, who is retiring when his term expires in 2010. GOP Rep. Jerry Moran has announced his intention to run for the seat, and he will likely be joined by his Republican House colleague, Rep. Todd Tiahrt.

The big Democratic name is two-term Gov. Kathleen Sebelius, who is also being considered for a Cabinet post in the Obama administration. Without her as a candidate, it will be hard for Democrats to win in such a heavily Republican state — Kansas hasn’t elected a Democratic senator since 1930.

4. Kentucky

Republican Sen. Jim Bunning has said he plans to run for reelection in 2010, and if he follows through, he will be one of the top Democratic targets. Bunning barely defeated current Lt. Gov. Daniel Mongiardo in a much more favorable environment for Republicans in 2004.

But while the national environment is now toxic for the GOP, Bunning’s biggest asset might be the ability to run against an Obama administration. President-elect Obama lost badly in Kentucky, faring worse than Sen. John F. Kerry did in 2004, and he could potentially be deadweight on the Democratic nominee in 2010.

Democratic speculation centers on Congressman Ben Chandler, who lost his last statewide bid for governor in 2003, and Mongiardo. State Auditor Crit Luallen and Attorney General Jack Conway would also be capable contenders.

5. Louisiana

Republican Sen. David Vitter greatly damaged himself after it was revealed during the “ D.C. Madam” scandal that he had solicited prostitutes. In one of the few states to be trending away from the Democrats, his toughest competition could come in a primary race. Louisiana Secretary of State Jay Dardenne and state Rep. Rodney Alexander are potential primary challengers against Vitter.

On the Democratic side, Rep. Charlie Melancon would be a leading contender if he chose to run. The congressman is sitting on $800,000 cash on hand and has shown staying power in a conservative district. Jefferson Parish District Attorney Paul Connick and Shaw Group CEO Jim Bernhard are also eyeing the race.

6. Missouri

The big question in Missouri is whether Bond will run for a fifth term. If not, the floodgates would open for a host of aspiring Republican officeholders, including former Sen. Jim Talent and Reps. Roy Blunt, Sam Graves and Jo Ann Emerson.

The likely Democratic challenger is Missouri Secretary of State Robin Carnahan, who carries a famous surname as the daughter of the late Gov. Mel Carnahan. She won more than 1.74 million votes statewide in 2008 — more than any other statewide Democratic candidate in Missouri history.

7. Nevada

Senate Majority Leader Harry Reid cannot count on coasting to reelection simply because of his leadership position. Republicans will want to exact revenge on Democrats for seeking to oust their own leader, Sen. Mitch McConnell of Kentucky, this past election.

GOP Lt. Gov. Brian Krolicki has already said he will likely challenge Reid, but Rep. Jon C. Porter, who lost his reelection bid, might also be seeking revenge against his nemesis Reid.

8. New Hampshire

On paper, the Granite State looks like one of the most favorable states for Democrats in the 2010 cycle. In 2006, the state swept out two sitting Republican congressmen, and Democrat Jeanne Shaheen easily ousted GOP Sen. John Sununu this year. Gregg is all that’s left preventing an all-Democratic delegation.

Gregg, though, has proven staying power. Since winning a close race in 1992, he has handily won reelection two more times — he is the first New Hampshire senator elected to a third term since 1968. And the Democratic bench is somewhat thin: Potential candidates include sophomore Congressman Paul Hodes and Katrina Swett, who was gunning to challenge Sununu but bowed out when Shaheen entered the race.

The ideal Democratic candidate is popular Gov. John Lynch, but New Hampshire operatives insist he’s not interested.

9. Ohio

Voinovich has been one of the Democrats’ favorite Republicans because of his relatively moderate voting record in the Senate. But with recent statewide Democratic victories — ranging from Obama to Gov. Ted Strickland and Sen. Sherrod Brown in 2006 — there’s little doubt Democrats will have Voinovich in the crosshairs.

Potential Democratic candidates include Lt. Gov. Lee Fisher, Rep. Tim Ryan and Cuyahoga County Commissioner Peter Lawson Jones. All would face a formidable task against Voinovich, a popular former governor who has won every statewide election by double digits, after serving as the mayor of the heavily Democratic city of Cleveland.

10. Pennsylvania

This could end up being the race of the cycle if MSNBC gabber Chris Matthews enters against GOP Sen. Arlen Specter. The 78-year-old Specter, who recently fought through Hodgkin’s lymphoma, has said he will run again. If he changes his mind, Democrats would have a real opening.

If Matthews passes up a run — or even if he doesn’t — all eyes will be on a pair of Philadelphia-area Democratic House members: Joe Sestak and Allyson Schwartz.

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Amid rising foreclosures, President-elect Barack Obama faces pressure to jump in before January and ask Treasury Secretary Henry Paulson to release unexpended financial rescue funds to help homeowners modify the terms of their mortgages.

Obama has already spoken up for the auto industry — an issue for his former colleagues in the Senate this week. But amid the transfer of power in Washington, going to Paulson would be a more unusual move: an incoming president tipping the scales in what’s become a dispute in the outgoing administration between Treasury and the Federal Deposit Insurance Corp.

The tensions spilled into the open Tuesday at a House Financial Services Committee hearing. “We are clearly falling behind the curve. … We need a national solution for a national problem,” said FDIC Chair Sheila Bair, who is seeking $24.4 billion in capital to help forestall as many as 1.5 million foreclosures between now and year-end 2009. Federal Reserve Chairman Ben Bernanke testified that the FDIC plan is a “very promising approach.”

But Paulson still refused to commit funds, even as he signaled that he hopes most of the remaining $410 billion available to Treasury will be left intact — and at Obama’s disposal.

Paulson’s office said later it won’t respond now to the hypothetical of Obama asking him to release funds to Bair. But House Financial Services Committee Chairman Barney Frank (D-Mass.) is prodding the incoming White House to take a stand, given that the fund has really become a shared responsibility between the incoming and outgoing administration.

Frank told Politico last week that he wanted to be a “shadchen” — Yiddish for “matchmaker” — between Paulson and Obama. And Tuesday’s hearing — where Bair, Bernanke and Paulson testified alongside one another — seemed designed to turn up the heat on the secretary.

The Massachusetts Democrat has been a close working partner with Paulson in the past but is clearly impatient with his friend. The tensions are reminiscent of their past differences over Paulson’s reluctance to embrace executive pay limits as part of the initial Treasury rescue bill. And Paulson, a former Goldman Sachs CEO, still tends to see the financial markets as his prime concern, whereas Frank would argue that he needs to pay more attention to the larger impact of home foreclosures — on individuals and the economy.

“Briefly and substantively,” Frank snapped when Paulson dragged on in his answers. And when the secretary and Rep. Mel Watt (D-N.C.) fell into a tangle of mixed metaphors — apples and oranges vs. trees and the forest — Frank stepped in again. “You can’t see the orange grove for the apple trees,” the chairman told Paulson.

“More needs to be done. I hear your frustration,” Paulson told lawmakers. But he sent conflicting signals as to what he will do to respond. “I am going to keep working on this and looking for a way,” Paulson testified. But in recent interviews, he has signaled that he plans no new major initiatives with the remaining funds.

The backdrop to the fight lies in the fact that foreclosure forbearance was a fundamental part of how the $700 billion package was sold to Congress this fall. Fearing a collapse of the financial system, Paulson told lawmakers then that the government must intervene in the market by buying up troubled mortgage-related securities, which had plummeted in value and were clogging credit lines. Democrats supported this approach with the promise that once Treasury held the mortgage assets, it would also use its influence to try to modify the terms where possible to slow the pace of Main Street foreclosures.

In fact, with the worsening economy, Paulson felt compelled to change his approach soon after the package was approved. And like governments in Europe, Treasury moved quickly to put about $250 billion in direct capital investments in banks.

Last week, Paulson went further, announcing that he was abandoning his initial plan entirely. Explaining that decision to the panel Tuesday, he said that buying up mortgage assets — even with the $410 billion still available — lacked the “firepower” to be effective.

Frank and other Democrats are accepting of some of these decisions. But lost in the process, they argue, is the commitment to mortgage relief.

“You seem to be flying a $700 billion plane by the seat of your pants,” Rep. Gary Ackerman (D-N.Y.) said sarcastically. Rep. Maxine Waters (D-Calif.) complained bitterly that she felt deserted after helping Paulson sell the bill to members of the Congressional Black Caucus, many of whom were suspicious of what they saw as a “Wall Street bailout.”

“It was a very important part, frankly, of trying to get votes for this bill that we would do mortgage foreclosure reduction. It is essential,” Frank said.

“Mr. Secretary, you are talking legitimately about your intent. But we had to get the votes for the bill. Our intent was also relevant. … The bill couldn’t have been clearer.”

Bair has stepped forward to try to fill this void with her independent initiative. And while soft-spoken and businesslike, she gave little ground to Paulson. “Much more aggressive intervention is needed if we are to curb the damage to our neighborhoods and broader economic health,” Bair told the committee. “The stakes are too high and the time too short to rely exclusively on voluntary efforts.”

The FDIC plan builds on its experience as the conservator for the former IndyMac Bank in California, which it took over in July. In this role, the agency instituted a loan modification program to deal with more than 60,000 troubled mortgages it inherited, and the new program builds on this model, which seeks to bring mortgage payments down to about 31 percent of a homeowner’s income.

To help get banks’ cooperation, the government promises to share in the losses in the event of future defaults, but even if this were to happen in about a third of the cases, FDIC estimates that 1.5 million foreclosures would be prevented by the end of next year. And if successful in slowing the drop in housing prices by just 3 percent, Bair said the $24.4 billion investment would yield much larger dividends in stimulating the economy.

Treasury officials argue that the inherent subsidy for banks is still too large and will encourage lenders to dump their worst loans onto the government. Bernanke also expressed some reservations about this provision, but he simultaneously praised the FDIC plan as attractive in its simplicity and reliance on loan services — rather than a large government bureaucracy — to handle much of the process.

“This is a very promising approach,” he said.

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The Arena forum at Politico.com posed this question to its gang of Washington insiders Tuesday: “Does the GOP need a change of leadership in Congress? Got any suggestions?”

One idea came from House Majority Leader Steny H. Hoyer (D-Md.), who offered this advice to his Republican colleagues:

“It’s not my job to weigh in on who Republicans should elect to lead their party in Congress. But I will say something about how top Republicans ought to lead.

“Republicans have a stark choice: to work constructively on legislation to solve our economic crisis, or to practice obstruction, emphasize our disagreements and position themselves for the next election. I understand that the temptation to take the latter course will be strong, especially when so many Republicans are blaming the media, blaming moderates, blaming everyone but themselves for what happened on Nov. 4.

“But we know what happened: Over the last eight years, Republicans had an unprecedented chance to put their philosophy into effect, and it was soundly rejected. Some conservatives understand that already. As the National Review’s Ramesh Ponnuru put it, ‘What we have seen over the last two election cycles, it should be emphasized, was not the rejection of one or another faction of the Republican Party, but of the party itself.’

“If Republicans convince themselves that they were punished for being ‘not conservative enough,’ if they stand in the way of solutions for our economy, I am convinced that they will suffer for it politically.

“But that shouldn’t be the deciding factor. Our country needs an engaged Republican Party, a loyal opposition. Our country needs Republican leaders in the tradition of Bob Michel, Everett Dirksen and Howard Baker: conservatives who are strong in their principles but who would rather help shape legislation for the common good than reflexively obstruct it for partisan positioning.

“As one prominent Republican said last week, ‘We are now the minority party, but let us resolve not to become the negative party.’

“And that’s probably the last time I’ll ever favorably quote Sarah Palin.”

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Rahm Emanuel was the lead bulldog for House Democrats, and without him, the caucus has lost much of its bite.

The combative, profane, high-speed Illinois Democrat bid farewell Tuesday to a House majority he helped build in order to run the West Wing in Barack Obama’s White House.

Without him, the Democratic leadership is now more loyal to Speaker Nancy Pelosi (D-Calif.) and lacks much of the political edge and cutthroat instinct that Emanuel brought to the chamber.

Democrats built a system during their first two years in power that centered, in part, on Emanuel’s ability to steer younger, more moderate members of the caucus, particularly those in the historic Class of 2006 who, as the party’s campaign chairman, he ushered to Congress.

“He’s the den mother,” said Arizona Rep. Gabrielle Giffords, a member of that class.

“He looked at policy and politics as one and the same,” said North Carolina Rep. Heath Shuler, a centrist member of the 2006 class who sparred with Emanuel over immigration reform.

“There’s going to be a lot less Yiddish and four-letter words,” freshman Rep. Steve Cohen of Tennessee joked.

In 2006, Emanuel and his Senate counterpart, New York Sen. Charles Schumer, recruited candidates such as Shuler, whose politics veered right from the Democrats’ traditionally liberal base.

Pelosi and her colleagues in the leadership embraced those members, hosting weekly meetings with the freshman class. But Emanuel helped protect these conservative Democrats on tough votes during their first term in Congress.

“He understands how far members are willing to go and how far they aren’t,” Shuler said. And that often means preventing votes, not just protecting potentially vulnerable lawmakers from taking a bad one.

“When members say to me, ‘I’ll do anything for you’ — that means voting with leadership when they ask you to and not being a pain in the ass about it,” Emanuel told his soon-to-be former colleagues, according to someone in the closed-door session. “I want you to know, I’ve got your back. I’ll feel better knowing that you’ve got my back.”

Soothing the moderates now falls to Majority Leader Steny H. Hoyer of Maryland, a natural conduit to more conservative Democrats. But Hoyer’s soft touch is a far cry from Emanuel’s swift, verbal assaults, as the leadership team loses one of its ruthless enforcers.

Emanuel’s departure also clears the way for Pelosi to consolidate even more power. Before he was offered the White House chief of staff job, Emanuel was thought to have a path to the speaker’s chair.

Pelosi loyalist Rep. John B. Larson of Connecticut won a promotion to caucus chairman, along with California Rep. Xavier Becerra as vice chairman. These moves help the speaker solidify her base, making her a stronger voice in negotiations with the incoming president.

But Democrats are Democrats, and their disunity has been on quiet display all week, as Reps. John Dingell of Michigan and Henry A. Waxman of California battle for the chairmanship of the Energy and Commerce Committee.

Members of the Democrats’ Steering Committee will meet Wednesday to schedule a formal election, but the two camps are jockeying heavily in the run-up to that race.

Waxman acknowledged while leaving the caucus meeting Tuesday that some members had expressed concern that his challenge of Dingell would roil the party. But he dismissed any suggestion that he would cut a deal to avoid that fight — “I don’t see that happening,” he said as he entered the Cannon Caucus Room.

“It’s problematic,” said North Carolina Rep. G.K. Butterfield, a senior member of the Energy and Commerce Committee who remains publicly uncommitted. “I wish we didn’t have to engage in a race of this nature.”

The race itself remains a tough one to call. “I’m not even sure the candidates know,” said Washington Rep. Jay Inslee, a Waxman supporter.

And most lawmakers dread picking sides.

Asked who she would be supporting, Rules Chairwoman Louise McIntosh Slaughter of New York exclaimed, “Oh, it’s a secret ballot, thank the Lord.”

The Waxman-Dingell fight did not surface in the leadership elections Tuesday. Only Becerra faced an opponent, easily beating Ohio Rep. Marcy Kaptur.

With these easy leadership elections over, the spotlight in the caucus meeting remained on Emanuel.

He got choked up when he addressed the caucus, but he went on to say he often tells high school kids that, at some point in their lives, they need to do something bigger than themselves. “I decided to take my own advice.”

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The Joe Lieberman soap opera is finally over — replaced on Tuesday by a new two-man show starring Barack Obama and Harry Reid. 

In the first episode — “What to Do About Joe” — a Senate majority leader who’s worked hard to win over the left-wing blogosphere and a president-elect who’s become everything to everyone are forced to make the pivot from campaign rhetoric to something close to governing.

The climax: Reid swallows his tough talk to keep Lieberman — and his vote — in the Democrats’ camp.

The epilogue: Daily Kos’ disgusted Markos Moulitsas declares, “I’m done with Reid as Senate leader.”

Senate Democrats’ decision to punish Lieberman for his campaign-trail transgressions with a slap on the wrist — he loses his spot on the Environment and Public Works Committee but keeps his chairmanship of Homeland Security and Government Affairs — may represent a productive start to the relationship between Reid and Obama.

But it underscores the challenges Reid and Obama face as they move from “If I were in charge” to “I am in charge.” They can’t please everyone who helped put them in power.

Reid tried to walk the line Tuesday. He said that “no one was more angry” than he was over Lieberman’s support of John McCain — and criticism of Obama — during the presidential race.

But echoing Obama — who’d said previously that he “held no grudges” against Lieberman — Reid also said, “This was not a time for retribution; it was a time for moving forward on the problems of this country.”

The this-way, that-way solution left Lieberman happy — he called it a “resolution of reconciliation and not retribution” — but it left plenty of Democrats and their allies grumbling.

Sen. Bernie Sanders (I-Vt.) — one of 13 caucus members who voted against the deal — challenged Lieberman over his threat to leave the party if he lost control of the Homeland Security panel.

“If you are a Democrat in your heart, why do you need your chairmanship to remain one?” Sanders asked Lieberman, according to a senator who attended the closed-door session.

But Obama’s publicly stated willingness to forgive Lieberman for supporting McCain gave the sometimes irascible Reid a chance to save face — and preserve a badly needed Democratic vote against GOP filibusters.

“I think once that was done, it set the climate,” Sen. Ben Cardin (D-Md.) told Politico. “There is something different about this guy, Barack Obama, that he really wants things done differently in Washington. It’s not about partisan politics. It’s all about governing. I think what President-elect Obama did made our decision in our caucus a lot more comfortable and easier.”

Rutgers University political science professor Ross Baker, who worked in Reid’s office recently as a visiting staffer, added: “Anybody who knows Reid and the Senate knows how painful this was, and Obama gave Reid cover.”

Reid warned Lieberman right after Election Day that he could lose his Homeland Security chairmanship. But in recent days, and after a discussion with Obama, he eased off. By Tuesday morning, after Democrats had approved a resolution allowing Lieberman to keep Homeland Security by 42-13, Reid was firm in his backing for his Connecticut colleague.

“Joe Lieberman is a Democrat. He’s part of this caucus,” Reid said after the vote.

Lieberman blamed the press and partisan tensions surrounding the presidential campaign for some of the controversy he created, but he did acknowledge that he would take back some of his anti-Obama comments if he could.

“Some of the statements, some of the things that people have said I said about Sen. Obama, are simply not true,” Lieberman said. “There are other statements that I made that I wish I had made more clearly, and there are some that I made that I wish I had not made at all. And obviously in the heat of campaigns, that happens to all of us, but I regret that, and now it’s time to move on.”

Inside the session with his colleagues, Lieberman offered similar comments, although Democratic senators said he was “more apologetic, more contrite” than at his press conference afterward.

There was only one motion considered — Lieberman would be permitted to retain his Homeland Security gavel, but he would lose his seat on EPW, a committee on which he’s served for two decades.

A long list of senators spoke out in favor of Lieberman, in addition to Lieberman himself, including Reid, Cardin, Majority Whip Richard J. Durbin of Illinois, and Sens. John F. Kerry of Massachusetts, Chris Dodd of Connecticut, Ken Salazar of Colorado, Tom Carper of Delaware, Bill Nelson of Florida, Evan Bayh of Indiana and Robert Menendez of New Jersey, as well as Sen.-elect Tom Udall of New Mexico.

Dodd, who acknowledged calling other senators on Lieberman’s behalf, said he made three specific points in addressing the caucus: Connecticut should not be penalized for Lieberman’s political actions, Lieberman should be judged on the “totality” of his life and career, and Lieberman was important in moving the Democratic agenda next session.

“I’ve known Joe longer than anyone in there, over 40 years, and you judge people on the totality of their lives,” Dodd said.

“This is a guy who was riding into Mississippi in the ’60s on segregation policies. This is a guy who was a progressive leader of our state Senate, the majority leader. This is a guy who was one of the most forward-looking attorney generals in the country. He was doing violence-against-women work in the 1960s and 1970s.”

But when several members pushed for a unanimous vote, Sen. Patrick Leahy (D-Vt.) strongly objected, calling the punishment “a slap on the wrist” for serious transgressions against the party, said several sources.

A vote was called, which Lieberman and the leadership won easily.

Sen. Barbara Boxer (D-Calif.), chairwoman of the Environment and Public Works Committee, complained afterward that she “did not think [Lieberman] should be chairing a full committee.”

Another Democrat, who asked not to be named, said he was “surprised we even got 13 votes once leadership had come down for Joe.”

The outcome was going to be difficult for Lieberman in any case. His top aides warned him against even speaking on the matter in the closed-door session.

But Reid, a former whip, knew that he would lose a vote for the entire 111th Congress if Lieberman bolted, and he didn’t want to see that happen.

“These kind of secret-ballot votes are all about what is best for them,” said one Democratic insider, speaking about a senator’s mindset going into the interparty fight. “Does it help me if Joe Lieberman gets kicked out [of the caucus] or leaves? How does it affect me? That’s what they are thinking about.”

With Lieberman continuing to caucus with them, the Democrats will have 57 votes in the next Congress — 58 if Anchorage Mayor Mark Begich hangs onto his lead over Republican Sen. Ted Stevens in Alaska. Two other seats — from Minnesota and Georgia — remain up in the air.

Top Democratic aides were fully aware that Reid and the leadership will be criticized by party activists, who are furious over Lieberman’s actions and possibly angrier still over any move to allow him to keep his gavel.

But they may need his vote at some point over the next two years, and Reid was aware of that. “Joe Lieberman will never step out of line again, that’s for sure,” said one senior Democratic senator.

In the end, the Senate did what it does best: It protected one of its own, according to numerous senators and aides.

“You are either in the club, or you are not,” said another Democrat. “Joe is in the club, so that’s why this happened.”

Ryan Grim and Martin Kady II contributed to this story.

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Auto state senators are pursuing a new compromise that would allow ailing companies easier access to an Energy Department $25 billion loan fund but require that any money borrowed be repaid to that same account to preserve its initial purpose of supporting a future generation of more fuel-efficient vehicles.

The proposal builds on an earlier one by the White House while giving Democrats some political cover in the face of what are sure to be complaints from environmentalists.

Republican senators from Missouri, Ohio and Kentucky—all with large auto interests —are active in the talks and hope to have the support of Michigan Democrats to build a bipartisan coalition.

Aides cautioned that the language was still unresolved Tuesday night, but it appears to be the strongest chance the industry has of winning assistance from the Senate, which turns to the auto issue Wednesday.

In the House, Speaker Nancy Pelosi (D-Calif.) has strongly opposed any diversion of the so-called Section 136 energy loan money, which was authorized last year and only fully funded under an appropriations bill this fall. The loans are intended to finance long-range commitments by the industry to retool plants for the production of advanced-technology vehicles and were approved as part of a larger commitment to improved energy efficiency.

“Sounds like a gimmick,” said a leadership aide of the proposed compromise, and the speaker has argued the industry’s immediate cash problems should be addressed through the Treasury’s financial rescue plan.

Toward this end, Pelosi is backing a House bill that would make up to $25 billion available to the industry after Dec. 1 from the Treasury funds for what are expected to be seven-year loans.

A similar measure was introduced this week in the Senate by Majority Leader Harry Reid, but the Nevada Democrat faces difficult choices now as he tries to navigate between auto industry allies and Pelosi’s position on the energy funds.

A key player is Senate Armed Services Committee Chairman Carl Levin (D-Mich.). If he joins with Republicans like Missouri Sen. Christopher Bond in support of the compromise, it would give it considerable heft, and presumably bring along his brother, Rep. Sander Levin (D-Mich.), an important player in the House.

Senate Minority Leader Mitch McConnell, with large auto interests in his home state of Kentucky, is supportive, and Commerce Secretary Carlos Gutierrez has been the point man for the administration.

All this could puts Reid in a pickle, since approving the compromise could aggravate relations with Pelosi but walking away from a potential deal would be embarrassing from Democrats after demanding assistance for the industry

More than Ford, General Motors faces potentially serious cash problems before the end of this year, and CEO Rick Wagoner told the Senate Banking Committee that “Our industry … needs a bridge to span the financial chasm that has opened up before us.”

And much as he opposes taking money from the financial markets rescue fund, Treasury Secretary Hank Paulson told the House Financial Services Committee Wednesday that he favored some federal aid to avert a major bankruptcy, given the problems already facing the economy.

If agreement can be reached on a compromise amendment, McConnell can use his position as Republican leader to force consideration by the full Senate. But if the agreement is that both alternatives are subject to a 60 vote super-majority, this could still open the door to mischief.

One option then for Reid would be to allow both to fail, saving Pelosi from having to deal with the proposal and putting the pressure back onto Paulson and the White House, if GM should in fact run into real cash problems this year.

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Hillary Rodham Clinton isn’t certain she would accept the Secretary of State post even if Barack Obama offers it to her, several people close to the former first lady say.

Press reports that portray Clinton as willing to accept the job – once the Obama transition team vets Bill Clinton’s philanthropic and business ventures – are inaccurate, one Clinton insider told Politico.

“A lot of the speculation and reporting is out ahead of the facts here,” said the person, who requested anonymity. “She is still weighing this, independent of President Clinton’s work.”

Clinton, the person said, remains deeply “torn” between the possibility of serving in Obama’s cabinet and remaining in the Senate to “help pass health care and work on a broad range of domestic issues.”

That comment jibes with what others close to Clinton have been saying since the Secretary of State chatter began last week: that Clinton is conflicted and the deal far from done, despite screaming headlines in outlets including the U.K.’s Guardian newspaper claiming the offer was made and accepted.

Most of the speculation about Clinton’s frame of mind in the last few days has been off-base, sources say, because she’s played her cards close to the vest, consulting only her husband and two or three kitchen cabinet advisers.

“We’ve gotten rid of all the other idiots,” joked one Clinton confidant, referring to the Clinton campaign’s propensity to leak.

Obama isn’t likely to make a formal offer of the post to Clinton unless he’s given assurances that Bill Clinton’s global charitable foundation won’t create future conflicts of interest with foreign governments.

The Clinton Global Initiative has earned praise for its efforts to eradicate AIDS, malaria and poverty in Africa. But it could prove problematic if the former president continues to arrange donations from foreign countries at the same time that his wife serves as secretary of state.

Obama’s vetting team expressed similar concerns about Bill Clinton’s overseas fundraising when Hillary Clinton was briefly considered for the vice-presidency.

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Treasury Secretary Henry Paulson found himself repeatedly on the defensive Tuesday as House Democrats—with the tacit blessing of Federal Reserve Chairman Ben Bernanke—threw their support to a FDIC mortgage relief program that Paulson has refused to include in his financial rescue efforts.

FDIC Chairwoman Sheila Bair has estimated that with an injection of $24.4 billion in capital, the program could forestall as many as 1.5 million foreclosures between now and year-end 2009. But thus far, Paulson has balked at using any of the $700 billion financial rescue package for this purpose, even though his close ally, Bernanke, described the FDIC initiative as “very promising.”

“I hear your frustration,” Paulson said.

But Paulson also sent conflicting signals as to what he will do to respond. He said he was working hard to find some resolution of the matter, but in recent interviews, he has signaled that he plans no major initiatives and hopes to leave the bulk of the remaining money to the incoming Obama administration.

The internal administration dispute spilled into the open before the House Financial Services Committee, where Paulson, Blair, and Bernanke appeared together as a single panel crafted by Chairman Barney Frank to try to force more action on the foreclosure issue. The Massachusetts Democrat has been a close working partner with Paulson in the past but is clearly impatient with the secretary for not being more aggressive in using the rescue funds to help homeowners.

“Briefly and substantively,” Frank snapped when Paulson dragged on in his answers. And when the secretary and Rep. Melvin Watt (D., N.C.) fell into a tangle of mixed metaphors: apples and oranges, vs. trees and the forest, Frank stepped in again. “You can’t see the orange grove for the apple trees,” the chairman told Paulson.

The backdrop to the fight lies in the fact that foreclosure forbearance was a fundamental part of how the $700 billion package was sold to Congress this fall. Fearing a collapse of the financial system, Paulson told lawmakers then that the government must intervene in the market by buying up troubled mortgage-related securities which had plummeted in value and were clogging credit lines. Democrats supported this approach with the promise that once Treasury held the mortgage assets, it would also use its influence to try to modify the terms where possible to slow the pace of “Main Street” foreclosures.

In fact, with the worsening economy, Paulson felt compelled to change his approach soon after the package was approved and like governments in Europe, Treasury chose to quickly put about $250 billion in direct capital investments in banks. Last week, Paulson went further, saying that he was abandoning his initial plan entirely, and even with more than $400 billion still available, this lacked the “firepower” he says he needs to be effective.

Frank and other Democrats accept some of Paulson’s moves, but lost in the process, they argue, is the commitment to mortgage relief. Bair has stepped forward to try to fill this void with her independent initiative, and there is growing anger that Paulson won’t make some adjustment to give her support.

“You seem to be flying a $700 billion plane by the seat of your pants,” said Rep. Gary Ackerman (D-N.Y), with sarcasm. And Rep. Maxine Waters (D-Calif.) complained bitterly that she felt deserted after helping Paulson sell the bill to members for the Congressional Black Caucus, many of whom were suspicious of what they saw as a “Wall Street bailout.”

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The changing of parties in the White House inevitably brings a reordering of Washington’s think tanks.

Come January, perhaps none will be more piped into the executive branch than the 5-year-old Center for American Progress, known for its emphasis on outreach and online messaging. The self-identified “action tank” was founded by John Podesta, who took a leave as the center’s president and CEO to serve as Barack Obama’s transition chief.

Fox News host Chris Wallace seemed a little surprised when Podesta pledged in a recent interview that he would return to the helm of CAP, rather than join the administration — a sign he wants CAP to take center stage and rival the political influence and intellectual power of Washington’s conservative think tanks.

“It suggests on some level [Podesta] understood the source of the conservative institutions’ success,” says Steven Teles, a political scientist at Johns Hopkins University, “which was continuity of leadership.”

At the same time, every think tank, no matter its slant, is preparing to react to the shifting balance of power across Washington, with the rising and falling fortunes of Democrats and Republicans in all branches of government.

Eight years of the Bush administration often left conservative groups as frustrated as liberal ones. Now, the major right-leaning research and policy outfits see some areas of agreement with Obama, but they also view him as a catalyst to enliven and invigorate the conservative movement.

“There were some things that George W. Bush did that we didn’t particularly like,” says Kim Holmes, vice president of foreign and defense policy at The Heritage Foundation, “and we would say so. But everybody would assume that we were Republicans first and it really didn’t matter, like it was token criticism. So we didn’t get any credit for that. Well, we won’t have that problem in the future.”

While the Wall Street crisis might have dried up donations to some private research groups and think tanks, analysts say the time is right for the rise of a new conservative institution — a sort of anti-CAP — similar to the emergence of the Democratic Leadership Council’s Progressive Policy Institute in 1989.

“All you need is about six or eight smart people to do it,” says PPI co-founder Robert J. Shapiro. “You need about three ideas to redefine a party, so long as you have a messenger. But if you have a compelling political and policy analysis, the messenger will find you. That’s what happened with PPI and Gov. Clinton.” PPI provided a font of pragmatic ideas and was a springboard for Bill Clinton’s presidential ambitions.

Teles said such a group of GOP reformers would most likely come from the pool of Republican governors — “people who realize that their future is tied to the reputation of the Republican brand, not the Hill.”

Next year, for instance, the American Enterprise Institute, which formerly housed Vice President Dick Cheney and incubated Bush’s neoconservative foreign policy, will have a new president for the first time in 22 years: Arthur C. Brooks, currently a professor of business and government policy at Syracuse University.

But Teles was skeptical that AEI could reinvent itself and remain on the cutting edge, saying the institute had a deep ideological divide between reform-motivated scholars and institutional status-quo keepers. “One question is whether or not AEI can really adapt enough to keep all those people inside,” he says.

For now, though, all eyes are on CAP, which, from its perch 10 floors above H Street in downtown Washington, will spend the next few months revamping its operation to acknowledge a kindred spirit in the Oval Office. “We have been oriented as opposition,” says Faiz Shakir, CAP’s research director and the editor-in-chief of its popular blog, Think Progress. “We are pretty good at that; we know how to deconstruct Republican ideas.”

Some see CAP, a tax-exempt organization with about 180 employees and an annual budget of about $26 million, filling much the same role for Obama as The Heritage Foundation did for President Ronald Reagan in the 1980s, producing people and policy proposals to keep the Democratic administration at the top of its game.

Recently, the center released a 657-page tome — “Change for America: A Progressive Blueprint for the 44th President” — that evokes Heritage’s “Mandate for Leadership.”

Already, CAP has served as the talent kitty for the transition team and, before that, the Obama campaign. Along with Podesta, there’s former Sen. Tom Daschle (a CAP distinguished fellow who served as Obama’s national campaign co-chairman); Melody Barnes (the center’s executive VP of policy who is on leave to serve as co-chairwoman of Obama’s Agency Review Working Group); Cassandra Butts (CAP’s senior vice president for domestic policy and an Obama transition team member); and Ron Klain (a member of CAP’s board of trustees who was named Vice President-elect Joe Biden’s chief of staff).

A number of other current and former CAP associates are expected to find administration posts, putting pressure on the center to quickly reload its cartridges.

David Boaz, executive vice president of The Cato Institute, said that while the center may be moving into the think-tank penthouse, it will be challenged not to slip into a penthouse malaise. “Six months from now, if we’re still in Iraq, will CAP scholars be deploring that and pointing to the high costs of our continued involvement?”

Stuart Butler, vice president of domestic and economic policy studies at The Heritage Foundation, pointed out that when George H.W. Bush assumed the presidency in 1989, “we did not think this was a natural … progression of Reagan. We saw that, in a sense, it was a danger area where things could go wrong.”

Sure enough, from the conservative think tank’s point of view, many things did. Butler said his foundation’s misplaced confidence in Jack Kemp, who failed to transform the Department of Housing and Urban Development, was among those.

Meanwhile, when Clinton was elected in 1992, vowing to “end welfare as we know it” and tackle the federal deficit, Heritage felt cautiously optimistic. The think tank fired off memos to his transition team.

“We thought the right way to do it was to take some of our issues, some statements Clinton made that he believed in, that clearly struck a chord with what we want to achieve, and let’s clearly, at the beginning, … say, ‘If you’re serious about this, this is what you need to do,’” Butler said. A good example was the North American Free Trade Agreement, a concept that the foundation had long endorsed but that got little traction until Clinton “changed the politics of it” and ultimately signed it into law.

On the domestic front, Butler envisions a number of areas where conservative interests dovetail with those of the White House-in-waiting. Topping the list is health care, an area in which the think tank prides itself for having worked extensively, and across the political divide.

At a recent dinner hosted by the policy journal Health Affairs, Butler said that he and Obama’s chief health care adviser, David Cutler, made a point of sitting at the same table and talked at length.

On foreign policy, Heritage’s Holmes suggested there would be a wait-and-see approach. The test, as he outlined it, would be if Obama shows sufficient “steel” in dealing with Iran and Iraq, and if he moves forward assertively with missile defense. If those two boxes are checked, Holmes said, "our comfort level will go up, and there will be a lot more room to work with him.”

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When President George W. Bush turns the Oval Office over to Barack Obama, he might as well dump the Lone Star of Texas into the bed of his pickup and haul it off with him.

The 28th state has loomed large over Washington for much of the past century — think the president, his father, Lyndon Johnson, Sam Rayburn, John Tower, Dick Armey and Tom DeLay.

But at noon on Jan. 20, Texas becomes — please don’t throw things — just another state.

“I guess Washington can finally exhale,” half-jokes former Bush counselor Dan Bartlett, a born-and-bred Texan who escaped to Austin last year.

The past 20 years — a dozen of them with a Texan in the White House — have seen the introduction of Shiner Bock beer to Washington grocery stores, the regular stocking of Dr Pepper at Congressional Liquor, plus the arrivals of both a Capitol Hill Tex-Mex establishment (Tortilla Coast, in 1988) and a centrally located downtown barbecue joint (Nick Fontana’s Capitol Q, in 1997).

Those may be here to stay, but other aspects of Texas’ political and cultural influence are already on the wane.

From 1995 through 2005, Armey and then DeLay held the office of House majority leader. But Armey is now five years removed from power, and DeLay is entangled in a criminal case.

And while The Hammer’s redistricting crusade in 2003 certainly helped Texas Republicans at the time, it has come back to haunt the state under Democratic rule. If not for DeLay’s machinations, three Texas Democrats would likely be sitting pretty these days as chairmen of powerful House committees: former Reps. Jim Turner (Homeland Security), Martin Frost (Rules) and Charlie Stenholm (Agriculture).

Instead, they’re all now exes, living in Texas, having lost their elections in 2004.

“I guess it’s unrealistic for any state to continue to enjoy national influence dating back to the ’20s and ’30s,” says Frost. “Texas has had this unbroken run. And sooner or later, it had to come to an end.”

That the end has come should be clear on the eve of Barack Obama’s inauguration, when the Texas State Society hosts its Black Tie & Boots Inaugural Ball at the Gaylord hotel at National Harbor in Maryland.

The last such hoodang, in 2005, drew 12,000 attendees, but there was a recently reelected Texan in the White House then. By contrast, on the night before Bill Clinton’s second inauguration, only about 7,000 people deigned to don their Tony Lamas.

Organizers are braced for another not-exactly-Texas-sized turnout in January.

Still, for those Democratic Texans who will remain in the nation’s capital, there’s a bright side to the changeover.

“I happen to be Republican,” says Jennifer Sarver, historian for the Texas State Society of Washington, D.C. “But most of my social friends are Democrats, and they are sick and tired of everybody assuming that if you’re Texan, you’re a conservative or a Republican.”

Democratic Rep. Gene Green says, “Our influence ebbs and flows, and I think we might lose some influence now.” Nevertheless, Green notes that he recently became the first subcommittee chairman from Texas on the Energy and Commerce Committee.

Former Clinton adviser Paul Begala, who cultivated his twang while growing up in DeLay’s old congressional district, crows about this marking the “end of the Texas Republican.”

“When the majority of Texas Republicans voted against a Texas Republican president’s economic package, … then I don’t know what it means to be a Texas Republican anymore,” he said.

Since at least the 1960s, Texans have been simultaneously admired and loathed by the rest of Washington. Their command, for the most part, has come on account of seniority. Their home districts were so safe that they were able to stay in Washington more or less all of the time and invest wholeheartedly in committee work.

“I think it played well back home. You find a very significant pride in the state, and I think the state was proud of it. I know in the case of my boss, [former Rep.] Bill Archer, when he became chairman of the Committee [on Ways and Means, in 1996], I never got a single complaint about him not being home. They were just happy he was chairman.”

Don Carlson, who spent 35 years as a Hill staffer to Texas Republicans, said that his bosses “left a legacy that the Texas delegation was a very powerful delegation, whether it was true in all the years after that or not. Certainly they left their mark on Texas with what they were able to do in terms of funding.”

Military bases and transportation structures and a space station in Texas stand as testimony to the legacy of might. According to a Houston Chronicle analysis, Texas received $2.2 billion in federal earmarks last year, second only to California.

So who carries on the Lone Star tradition in a Democrat-dominated Congress?

For the moment, the reins fall into the hands of Texas Republican Sens. Kay Bailey Hutchison and John Cornyn. Both have been known to wear the boots, but neither attracts the cult of personality Washington has come to expect from denizens of the state that calls itself a republic.

Republicans think they have a rising star in Rep. Jeb Hensarling, the chairman of the Republican Study Committee. Democrats think they have one in Rep. Chet Edwards, who chairs the Appropriations Subcommittee on Military Construction.

Currently, only two Texas Democrats chair committees in the House — Silvestre Reyes (Intelligence) and Gene Green (Ethics) — and neither of them is standing.

“That’s almost unheard of,” says Carlson.

Without a Texan in the White House or in a top-level leadership spot, members from the state may have to work across the aisle if they hope to bring home the bacon like they did in days of yore.

“If it could get its s–t together as a group of 32,” says one Texas-born Democratic Hill staffer, “there are very few things it can’t get accomplished, even if most of them are in the minority.”

The Bush administration and the Texas delegation have one last chance this year to deliver some love for the folks back home: a new federally funded agricultural biosecurity lab is considering five proposed sites, including one in San Antonio.

Texans or no Texans, real pork will still be served in Washington. Nick Fontana says he’s not too worried about his barbecue business. He says Bush has never darkened his door, and that Washington is probably ready for a break from the stomp, stomp, stomping of big Texas boots, anyway.

“People don’t realize how big and diverse Texas is,” he says. “Europeans and foreigners here think that every Texan is a crazy, redneck cowboy.”

But Bartlett says even Washingtonians will eventually come around. “I won’t be surprised if there is a resurgence after this president rides off into the sunset and all those animosities and short-term issues around George W. Bush fade away,” he says.

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