by James Oliphant and Mike Dorning

Poor Roland Burris.

The guy just can't buy a break right now.

The embattled senator just emerged from his hour-long meeting with Sen. Dick Durbin, the Senate Majority Whip and the senior senator from Burris' state of Illinois. Durbin wanted to hear Burris' explanation of his ties to disgraced former Gov. Rod Blagojevich for himself.

At the end of the session, Burris tried to sneak out through the side door in Durbin's third-floor office in the Capitol. Unfortunately for him, Chicago reporters who have covered Durbin know about the door, which leads almost directly to an elevator.

That meant that when a young aide emerged from Durbin's office and hit the "down" button, some in the press corps staking out the meeting knew what was up. Burris emerged and was quickly cornered by a handful of reporters in front of the elevator.

Burris said he had a "good discussion" with Durbin, but would not elaborate.

Then for a few long moments, he stood there, alone, and said nothing, perhaps setting some kind of record for the longest a senator has ever stood in the Capitol without saying anything.

Burris looked plaintively at the indicator light above the golden elevator doors. The car was still two floors below. You could almost hear him crying "Come on!"

More questions. He finally said he was "under orders" not to talk about the meeting.

"Under orders from who, sir?" someone asked.

"My lawyer," Burris said.

A trader with now-defunct Lehman Brothers watches the stock market plunge last September. (David Karp/AP)

by James Oliphant

For weeks, President Obama has been pushing hard on his plan to revive the nation's economy, driving the $787-billion stimulus package through Congress, following up with a plan for homeowners facing foreclosure and readying a strategy for reviving the moribund credit system.

But on one crucial piece of his overall strategy, Obama and his economic team have kept a relatively low profile: an overhaul of the federal regulatory system that sets and enforces the rules under which banks, hedge funds, stockbrokers and the rest of the nation's financial institutions must operate.

Of all the elements in Obama's strategy, regulatory reform could be the toughest -- and take the longest time to achieve.

The White House and Capitol Hill Democrats are separately developing the new framework for the sprawling and increasingly complex financial services industry, a step many experts view as essential for preventing future disasters.

Many factors contributed to the meltdown that struck Wall Street last year, to such calamities as the demise of investment bank Lehman Bros. Holdings and to the emergency bailouts that kept Citigroup and American International Group from collapsing as well.

But there is widespread agreement that an outdated regulatory system and lackluster oversight by watchdog agencies also played roles in bringing on the crisis. And in political terms, persuading Congress to pony up more money to support the financial system -- which many experts believe will be necessary -- will be nearly impossible without new safeguards.

Although many agree on the shortcomings of the current system, devising and winning agreement on a new one present a thicket of challenges, from overcoming industry opposition and defusing turf wars among federal agencies to striking a balance between protecting consumers and encouraging growth in finance and the economy as a whole.

"The challenge is going to be separating politics from policy," said Scott Talbott, the lead lobbyist for the financial services industry in Washington.

Read about the push to reform the nation's financial services industry in Monday's edition of the Los Angeles Times.

by James Oliphant

An effort to curb executive pay at the nation's most troubled banks, inserted at the last minute into Congress' mammoth economic stimulus bill, has sparked an outcry from financial services groups and others who warn the caps could harm the government's efforts to revive the economy.

During final negotiations on the $787-billion package last week, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) slipped in a provision to limit bonuses for executives at institutions receiving government bailout funds to a third of their salaries. And the bonuses could be paid only in stock irredeemable until the government was paid back in full.

President Obama is expected to sign the stimulus into law Tuesday in Denver. But the White House and Senate Democrats could clash later over the executive pay caps if the White House seeks a legislative adjustment.

The limits go beyond those advocated by the Treasury Department and came as a surprise to Wall Street. Financial services experts are particularly troubled that the caps apply not just to senior executives but to traders, investment bankers, fund managers and others compensated largely through performance-based commissions.

Dodd's provision also would apply to the more than 350 firms that have received money from the Troubled Asset Relief Program launched by the Bush administration in the fall. It would affect senior executives and as many as 20 of the highest-paid employees of a participating firm.

"We expected compensation restrictions on TARP company executives, but not on the sales force," said Scott Talbott, head of government affairs for the Financial Services Roundtable in Washington.

by James Oliphant

Flip to the Senate channel on C-SPAN tonight and you are likely to see an empty chamber. There is probably more arresting television to be found.

Technically, the body is still voting on the economic stimulus package, but a almost all senators cast their votes over an hour ago. The final tally, however, is being held open tonight so that Sen. Sherrod Brown of Ohio can fly to back to Washington from Ohio, where he was attending a memorial service for his mother.

The White House dispatched a military jet to fly Brown from Cleveland to Washington--and he is expected to cast his vote later tonight. (Add that to the stimulus price tag.) Brown's vote is critical to give Democrats the 60-vote majority they need to avoid a filibuster and pass the massive bill. Three Republicans voted for the measure.The House passed the bill earlier today.

You might wonder why some other Republican, such as, for example, Brown's colleague from Ohio, Sen. George Voinovich, doesn't simply agree to vote for the package to save everyone the trouble. But such is the atmosphere in Washington right now that no one wants to break party ranks on a vote this large--even if, in the end, the measure is going to pass.

by James Oliphant and Janet Hook

Just about anyone connected with the $789 billion economic stimulus bill has agreed that it won't begin to fix the nation's broken economy over night. But just how soon can Americans begin to feel its benefits, and when will we know whether it's working?

After all, the scale of the legislation is so huge and its provisions so diverse that its effects could potentially be felt in almost every corner of American society -- from small businesses and major industries to individuals in their varied roles as workers, taxpayers, and consumers.

And that means the impact of the bill, which is expected to win final approval by Congress today, will be felt almost immediately -- and for months and years to come.

Like a time-release capsule, the plan's provisions will move into the nation's economic bloodstream in stages. A majority of Americans should see more money in their pockets quickly, as a result of tax cuts designed to reduce withholding and fatten take-home pay. Investments science, basic research and moving toward the so-called "green economy" may not yield sizable benefits for years, if not decades.

by Noam N. Levey

First-time home-buyers would get a larger tax break. Laid-off workers would receive higher unemployment benefits and new subsidies for heath insurance.

And all but the wealthiest workers would soon get a tax credit worth as much as $800 per couple.

Bigger government checks -- long favored by lawmakers in an ailing economy -- could soon begin landing in mailboxes across the country, and new tax breaks would be available to many families, if the economic stimulus package clears Congress this week.

The $789-billion compromise worked out by House and Senate negotiators Wednesday contains a long list of new ways that Americans can get money from Washington as they struggle through the worsening recession.

Below are some provisions of the bill, which must still be approved by the House and Senate before being sent to President Obama for his signature.

Taxpayers

For most Americans, aid would show up most directly in a simple tax credit.

Workers making less than $75,000 a year would get a $400 credit for 2009 and 2010. Couples making up to $150,000 would get $800.

Higher-income taxpayers would see smaller credits. Individuals making more than $100,000 a year and couples making more than $200,000 would not get the credit.

In addition, 24 million middle-income Americans would be spared from paying higher income taxes under the alternative minimum tax.

The tax was originally designed to apply only to the wealthiest Americans, but it was never indexed for inflation, so larger numbers of taxpayers have been required to pay it.

by James Oliphant and Richard Simon

Congressional staffers worked overnight putting the finishing touches on the sprawling compromise stimulus bill that Democrats hope can be passed and signed into law by President's Day.

House and Senate Democratic leaders reached agreement Wednesday on a $789-billion economic recovery bill that President Obama has called crucial to pulling the country out of its worst financial crisis since the Great Depression.

The bill, slimmed down and reworked to win the handful of GOP votes needed to ensure final approval by the Senate, would finance a flurry of infrastructure and construction projects, extend unemployment benefits, subsidize healthcare coverage for those out of work, and provide tax relief for many. Democrats say it will create or preserve 3.5 million jobs nationwide. The House could vote on the bill as soon as today, and the Senate shortly after, but the precise wording of the massive bill was still being hashed out late Wednesday night and early Thursday.

Republicans lined up early against the bill, saying it was bloated with unnecessary government spending programs, featured too few tax cuts and would substantially increase the national debt. Until the three GOP moderates defected late last week, it remained possible that the minority would be able to delay the bill from moving forward and perhaps force radical changes.

Some Democrats complained that the package was not big enough but said they had no choice but to accept it if the measure was to win the votes of deficit-minded senators. The stimulus package was the first major initiative of the Obama administration and a crucial first step in its plan for reviving the nation's troubled economy.

"There is no choice here, colleagues," Senate Finance Committee Chairman Max Baucus (D-Mont.) told fellow senators gathered in an ornate room in the Capitol to seal the deal. "We must enact this legislation to get jobs in this country."

The agreement came faster than many on Capitol Hill expected, but it didn't arrive without moments of high drama.

by James Oliphant and Richard Simon, and updated

Senate leaders said today that negotiators have struck a deal on a final version of a sweeping economic recovery package. If true, the bill could be sent to the president for his signature by the end of the week.

The new plan is budgeted at $789 billion, a figure about $50 billion less than the one attached to the Senate bill that passed Tuesday, they said.

However, there was no confirmation of the agreement from House leaders, including Speaker Nancy Pelosi's office -- and there were reports that some Democrats in the House were unhappy with the compromise.

A formal conference committee session involving House and Senate negotiators was postponed while details of the agreement were being worked out in Pelosi's office late Wednesday afternoon, with House members pushing for more money for school construction and modernization.

"I think we're moving very rapidly toward making an announcement of a deal," Nadeam Elshami, a spokesman for Pelosi, told a group of reporters camped outside the speaker's office.

Senate leaders this afternoon said that several House provisions were added to boost job creation, but the overall cost of the bill was trimmed, largely by adjusting some tax provisions and scaling back the reach of some Medicaid funding.

Senate Majority Leader Harry Reid (D-Nev., pictured here in an AP photo by Susan Walsh) said the compromise version "creates more jobs than the original Senate bill and spends less than the original House bill." The original Senate bill was valued at $838 billion; the cost of the House package was estimated at $819 billion.

House Democrats succeeded in restoring some funds that were stripped out by a group of Senate moderates last week, including $54 billion in aid to struggling state governments and $10 billion for school construction and modernization. Both line items were important to the White House, which appeared to take a leading role in pushing the parties to an agreement in last 24 hours.

The bill, as it stands now, looks cleared for passage. The small cadre of moderate Republicans who supported the $838 billion Senate bill, Sens. Susan Collins and Olympia Snowe of Maine and Arlen Specter of Pennsylvania, said Wednesday they will support the compromise agreement. They, along with some moderate Democrats, had suggested that if the bill deviates too much from the Senate package, they will not vote for it.

"This is obviously a very difficult vote," Specter said. "But I believe it is indispensable that strong action be taken."

by James Oliphant

Sometimes, Saturday Night Live is worth a thousand words of political analysis.

The latest exhibit: last night's show. In the opening, Fred Armisen playing Senate Majority Leader Harry Reid and Kristen Wiig playing House Speaker Nancy Pelosi detail their different approaches to the stimulus. The differences between the two Democrats are played for laughs, but the jokes aren't off the mark.

Where Reid must seek some Republican support to avoid a filibuster--witness his negotiations last week with a handful of moderate senators from the other party--Pelosi has the votes to simply ram anything she wants through her chamber. With the stimulus, she did just that, failing to secure a single vote from the GOP. The speaker clearly believes Democrats have a mandate after last year's elections and she isn't hesitating in acting on it.

Now the two versions of the stimulus bill must be reconciled--and in the end, perhaps to Pelosi' dismay, that small bloc of Republican moderates may hold the power to make or break the package.

Check it out above.

by James Oliphant

CAPE CORAL, Fla.--Jim Burch is a proud man from a proud town. But it has come to this.

"It breaks my heart to say we need help," he says.

This sprawling city on Florida's southwest coast values its tradition of not relying on government aid, of preferring to be left alone. That practice had sustained it through periods of dramatic growth.

But when the Florida housing market collapsed, Cape Coral tumbled with it. You can now buy a nice home near the water here for just over $100,000--70 percent less than it would have cost a few years ago. Unemployment has spiked over 10 percent largely because of the loss of construction work.

For Burch, the mayor of Cape Coral, the economic stimulus being debated in Congress might be a godsend. It could mean millions of dollars for work projects and thousands of jobs. For one thing, the city could re-start its upgrade of its sewer and water systems. The project stopped halfway through several months ago when the city ran out of funds for it--and more than a thousand jobs went away with it.

But to Burch's consternation, his representative in Congress, Connie Mack IV, voted against the $819 billion stimulus package last week in the House. Now the bill is bogged down in the Senate as Democrats and Republicans try to slash spending provisions in an effort to make the legislation more politically palatable.

By Andrew Zajac

The Government Accountability Office has churned out another report on the federal government's controversial Cuba broadcasting program and this one is similar to many previous negative reviews.

The document's bland title "Broadcasting to Cuba. Actions Are Needed to Improve Strategy and Operations", does not do justice to its sharply critical message, which can be distilled thusly:

--Few, if any Cubans, see U.S. government-sponsored programming beamed by the Office of Cuba Broadcasting through Radio and TV Marti.

--The quality of programming leaves much to be desired both in entertainment content and in meeting journalistic standards.

--This is a lousy use of tax money.

You can read the entire report here: GAO-Cuba.pdf

by Jim Tankersley

The Senate quickly confirmed seven of President Obama's cabinet nominees this afternoon, mere hours after the Inauguration - but it left many more, including Hillary Clinton, to wait at least another day.

Among those winning approval by unanimous consent: Interior Secretary Ken Salazar; Energy Secretary Steven Chu; Education Secretary Arne Duncan; Homeland Security Secretary Janet Napolitano; Peter Orszag, director of the Office of Management and Budget; Eric Shinseki, the secretary of Veterans' Affairs; and Agriculture Secretary Tom Vilsack.

Secretary-of-State-nominee Clinton was originally expected to make that list, but Sen. John Cornyn (R-Texas) held her up by a day over conflict-of-interest objections to her husband, former Bill Clinton, and his charitable foundation's foreign donors.

Others who face a more protracted process include Labor nominee Hilda Solis, Treasury nominee Timothy Geithner, Attorney General nominee Eric Holder and Transportation nominee Ray LaHood. Obama also still needs tp nominate a commerce secretary pick to replace Bill Richardson, who withdrew from consideration amidst a scandal in his home state New Mexico.

Most observers expect all of Obama's nominees to eventually win confirmation. Senate Majority Leader Harry Reid (D-Nev.) urged as much in a statement this afternoon.

"President Obama has nominated a cabinet of exceptionally bright and capable people," Reid said. "They represent a cross-section of our country, geographically and politically. It is up to us, Democrats and Republicans in the Senate, to confirm these worthy nominees quickly so that they, along with our new President, can hit the ground running."

By Jim Tankersley

For all the fire they can spit on C-SPAN, ranting about procedure or policy, the truth is that most United States senators are exceedingly polite to one another in public. Friendly, often.

Every once in a while - like, say, when a sitting member of a senate committee appears before that committee for a hearing into his pending nomination to a cabinet post - you get, in the words of one participant, "a full-fledged bouquet-tossing contest."

And oddly enough, a few nuggets of policy plans.

That's the scene this morning in a meeting of the Senate Energy and Natural Resources committee, which is quizzing committee member Sen. Ken Salazar (D-Colo.) on his nomination to be Interior Secretary under President-elect Barack Obama.

Republicans and Democrats have repeatedly told Salazar how much they admire his integrity and how they'll miss him when he leaves the Senate. They've called him brother, professed their love, and invited him to visit their states (and, in the case of Sen. Mel Martinez of Florida, offered to arrange for him to wrestle alligators in the Everglades).

"I think Mel just probably left to go buy you flowers," Sen. Richard Burr (R-N.C.) joked after Martinez called Salazar a "good friend." This after Sen. Ron Wyden (D-Ore.), made the crack about bouquet tossing.

By Jim Tankersley

Barack Obama has pitched his stimulus package as a quick jolt for the ailing economy and a "down payment" on his priorities as president. But those goals appear to be colliding in at least one key area: energy independence.

The stimulus plan increasingly appears unlikely to include major investments in so-called "green infrastructure" - the wires and rails that could deliver renewable energy to Americans' homes and help them kick their gasoline addictions - according to alternative-energy advocates who are discussing the plans with the Obama transition team.

It's a timing issue. The blueprints and, in many cases, the authority simply don't exist to lay miles of high-speed rail lines, or to build a sprawling web of new power lines to create a truly national electric grid.

"Before you spend billions of dollars on new lines, you have to spend millions of dollars on design work," said Michael Moynihan, the green project director of the liberal think tank NDN, who has worked extensively on green infrastructure and the stimulus. "Nobody had been thinking about this much money (becoming available). So the planning just has not been done."

by Jim Tankersley, and updated

Only on Capitol Hill - and maybe an elite physics department near you - does a Nobel-winning scientist garner round-the-corner lines, an overflow crowd and a cascade of flashbulbs when he steps out in public.

That was the reception this morning for Steven Chu, the physicist and director of the Lawrence Berkeley National Labratory, when he showed up in a Senate committee room this morning for a hearing on his nomination as Barack Obama's energy secretary.

Hillary Clinton may have the bigger star power in the confirmation world today, as she prepares for a committee grilling on her nomination as secretary of state. But here in the Dirksen Senate Office Building, packed with energy lobbyists and non-profit executives, Chu is the one basking in a warm, bipartisan welcome.

Sen. Jeff Bingaman (D-N.M.), who chairs the energy committee, opened the floodgates of praise for Chu's academic and scientific record, saying he uniquely possesses "the vision and insight necessary to forge an energy policy for the 21st century."

The committee's top Republican, Sen. Lisa Murkowski of Alaska, told Chu "It's probably fair to say that you are uniquely poised in your ability to bring with you your background that relates the science and the technology" of the energy department.

Chu's home state senators, Barbara Boxer and Diane Feinstein of California, were equally effusive: "Simply stating, in my opinion," Feinstein said, "there is no one brighter or more equipped than this man to become secretary of energy."

Chu may face at least mildly tougher questioning later, when committee members get a chance to question him on energy policy, nuclear weapons stockpiles and the Obama Administration's plans for global warming, among other topics.

by Jill Zuckman

Roland Burris won his battle to succeed Barack Obama as the junior senator from Illinois this afternoon as Senate Democratic leaders dropped their objections and said they expect him to be seated this week.

The agreement came after Senate lawyers said Burris met the chamber's rules and could be sworn in.

"Barring objections from Senate Republicans, we expect Senator-designee Burris to be sworn in and formally seated later this week," said a joint statement from Senate Majority Leader Harry Reid and Assistant Majority Leader Dick Durbin.

The Senate Democratic leaders had told Burris last week that he needed to testify before the Illinois House impeachment committee about his relationship with Gov. Rod Blagojevich and submit a signature from Illinois Secretary of State Jesse White certifying his appointment by Blagojevich.

"We have spoken to Mr. Burris to let him know that he is now the Senator-designate from Illinois and as such, will be accorded all the rights and privileges of a Senator-elect," said the joint statement.

by James Oliphant

Another Senate Republican is hanging them up.

Sen. George Voinovich of Ohio announced to day that he will not seek reelection in 2010. His retirement comes on the heels of the announcement last week from Sen. Christopher "Kit" Bond (R-Mo.) that he, too, will not seek reelection.

Sens. Mel Martinez (R-Fla.) and Sam Brownback (R-Kan.) have already said they won't return. The 2010 election cycle now looks to be increasingly competitive. Both Missouri and Ohio have shifted in the Democrats' direction in recent years. Ohio elected Sen. Sherrod Brown, a Democrat, in 2006.

Voinovich said he wants to focus on the problems facing the nation.

"In my lifetime of public service, I have never seen the country in such perilous circumstances," Voinovich said in a statement Monday. "Not since the Great Depression and the Second World War have we been confronted with such challenges, as a nation and as a world. Those of us that have been given the honor to serve in these times must step up to the plate and put this country on a course that will see it through these harrowing times and make it strong and viable for the 21st century."

While perhaps not the most dynamic member of the Senate, Voinovich has been a reliable centrist and has long been popular in the Buckeye State. A two-term governor, he also served as Cleveland's mayor. He was elected to the Senate in 1998.

by Mark Silva

How much pressure will there be on Congress to enact an economic stimulus plan swiftly? House Speaker Nancy Pelosi says there will be no congressional recess for the Presidents' Day holiday if they haven't finished work by then.

So, basically one month to enact a $775-billion booster-shot for the American economy, a price-tag which President-elect Barack Obama acknowledges may well grow once Congress gets its hands on the recovery plan he is proposing.

This is what Pelosi (D-Calif) said in an interview with PBS' Jim Lehrer aired this evening on The Newshour.

The plan is "to go through the... president-elect's proposal, have Congress work its will on it, and have it signed, sealed, and delivered for the American people before we leave the Presidents' Day recess,'' Pelosi said.

"That is your deadline?'' Lehrer asked.

"That is my deadline,'' the speaker said, "and if we do not have agreement and a bill by then, we won't have a recess. We cannot leave here without an economic recovery package for the American people, because, as the President-elect has said, the consequences are very severe. We lose 500,000 jobs a month -- a month, so this is long overdue. We begged President Bush to take action. The recession has only deepened. We must act, and we must act now.'

See the full transcript of the interview, courtesy of PBS

by Jim Puzzanghera

President-elect Barack Obama today asked Congress to delay next month's planned switch to all-digital broadcast television, warning that the TVs of millions of Americans could go dark because of major problems in the government's preparations.

In a letter to Congressional leaders, John Podesta, co-chairman of Obama's presidential transition team, urged that the Feb. 17 conversion date be extended. A major reason was the announcement this week by the Commerce Department that it had run out of money for a government program to provide $40 coupons for low-cost converter boxes to allow older TVs to receive the new digital signal. But Podesta also cited problems with the government's effort to educate the public about the switch and help prepare people, particularly the elderly, poor and those living in rural areas.

"With coupons unavailable, support and education insufficient, and the most vulnerable Americans exposed, I urge you to consider a change to the legislatively-mandated analog cutoff date," Podesta wrote to the chairmen and top Republicans on the Senate Commerce committee and the House Energy and Commerce committee.

Congress decided in 2005 to require all TV stations to broadcast only in digital to free up valuable airwaves. People with cable, satellite or phone company TV services will continue to get broadcast stations. But those who rely on antennas to watch TV must have either a newer set with a digital receiver or get a digital-to-analog converter box.

by James Oliphant

Senate leaders will announce Thursday an agreement with Citigroup in which the financial giant will throw its support behind legislation that allows homeowners in bankruptcy to modify the terms of their mortgages.

The provision has been long sought by Democrats as a means to give homeowners who are "underwater"--who owe more money on their homes than they are worth--the means to strike a more favorable deal with banks.

But giving bankruptcy judges the power to "cram down" mortgages has been strongly opposed by congressional Republicans and mortgage lenders, who say that it would make providing loans riskier and, because of that, reduce the amount of credit available to buyers.

The measure was termed a deal-breaker in last fall's $700 billion Wall Street bailout bill and was left out of the final package. But Citigroup's about-face suggests momentum is building to include the mortgage provision in the economic stimulus package under development in Congress.

"This is the breakthrough we've been waiting for," said the bill's sponsor in the Senate, Sen. Dick Durbin (D-Ill.) "They can make a big difference in convincing their fellow institutions to join us."

by Frank James

Don't get rid of those old analog televisions yet. The national transition to digital television was supposed to occur next month on Feb. 17. But some key members of Congress and the Obama presidential transition may engineer a delay of a few months because of problems in the transition.

There's been growing concern that the Federal Communications Commission has mishandled the roll-out in a way that could potentially leave millions of viewers with analog TVs unconnected to cable without the ability to get a signal.

The problem is a backlog in the federal program that provides coupons to the TV owners to offset the cost of converter boxes that will be needed by analog TVs to receive a signal once TV broadcasters completely change over to transmitting digital signals alone.

According to Broadcasting and Cable magazine's website:

Consumers Union (CU) late Wednesday asked the heads of the congressional committees with telecommunications oversight, as well as the current and future administrations, to consider delaying the Feb. 17, 2009 transition date.

In a letter to Rep. Markey, Rep. Henry Waxman (D-Calif.), the incoming chairman of the House Energy and Commerce Committe, and others, the CU requested that Congress consider a delay "until a plan is in place to minimize the number of consumers who will lose TV signals, particularly by fixing the flaws in the federal coupon program created to offset the cost of this transition."

by Frank James

President-elect Barack Obama is due to make a major speech on the economy today at George Mason University in Northern Virginia just outside Washington, D.C.

It is essentially a call for support of what is expected to be a huge economic stimulus package he hopes to get enacted in the first few months of his presidency. He warns that if an economic stimulus isn't passed quickly enough, it may come too late to stave off a dramatic decline not of just the economy but the nation too.

His presidential transition office has released excerpts:

I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible. If nothing is done, this recession could linger for years. The unemployment rate could reach double digits. Our economy could fall $1 trillion short of its full capacity, which translates into more than $12,000 in lost income for a family of four. We could lose a generation of potential and promise, as more young Americans are forced to forgo dreams of college or the chance to train for the jobs of the future. And our nation could lose the competitive edge that has served as a foundation for our strength and standing in the world.

There is no doubt that the cost of this plan will be considerable. It will certainly add to the budget deficit in the short-term. But equally certain are the consequences of doing too little or nothing at all, for that will lead to an even greater deficit of jobs, incomes, and confidence in our economy. It is true that we cannot depend on government alone to create jobs or long-term growth, but at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe. Only government can break the vicious cycles that are crippling our economy - where a lack of spending leads to lost jobs which leads to even less spending; where an inability to lend and borrow stops growth and leads to even less credit.

Jack Kemp, right, at a National Commission on Fair Housing and Equal Opportunity hearing at Access Chicago on Tuesday, July 15, 2008. He was accompanied by fellow former HUD secretary Henry Cisneros. (Chicago Tribune photo by Tom Van Dyke.)

by Frank James

Jack Kemp, the former congressman, Housing and Urban Development secretary and vice presidential running mate to 1996 for Republican presidential nominee Bob Dole, has cancer -- though details on the type of cancer haven't been made public.

Before Kemp entered politics, he was the star quarterback for the Buffalo Bills.

The Associated Press reports a statement was issued by his office. According to the AP:

The 73-year-old Kemp said he will continue to serve as chairman of his Washington-based Kemp Partners consulting firm and will remain involved in charitable and political work.

"He's a tough guy, of deep faith, and his multitudes of friends are praying for the best," Dole said today.

by Mike Dorning

Senate Majority Leader Harry Reid opened a potential path to seating Roland Burris in the Senate after a 45-minute meeting with the former Illinois attorney general at the Capitol this morning.

After days in which Senate leaders had demonstrated determined resistance to Burris's appointment to the Senate by scandal-tainted Illinois Gov. Rod Blagojevich, Reid praised Burris as "candid and forthright." And he suggested that testimony which Burris is to give before the state legislature's impeachment committee on Thursday could be crucial to his prospects of gaining the seat.

"He's going to go answer any other questions they might have. He's not trying to avoid any responsibility and trying to hide anything," said Reid (D-Nev.) "Once that's done, we'll be in a different position and see what we are going to do."

One Democratic aide said the Senate leadership's attitude toward the appointment had now "thawed."

Still, citing a Senate rule, Reid said the Senate would not seat Burris until his certificate of appointment is signed by Illinois Secretary of State Jesse White. White has declined to sign the certificate but Burris has gone to court to seek an order requiring White to certify the governor's appointment.

Reid said he still would ask a Senate committee to examine the circumstances surrounding the appointment before Burris is seated but said he hoped the process would move swiftly.

"There's going to come a time when the entire Senate is going to have to act on this, and that day I hope would come sooner rather than later," Reid said.

Burris's appearance at the opening of the Senate session and the refusal to seat him stirred saturation media coverage, eclipsing efforts by Democrats to promote their economic stimulus plans.

On Tuesday, an influential Democrat, Sen. Dianne Feinstein (D-Calif.) broke with the Senate leadership and urged them to seat Burris.

By Jim Tankersley

You can't cross a street in Washington these days without bumping into someone with a 12-point set of recommendations for President-elect Barack Obama and the massive economic stimulus plan he and Congressional leaders are drafting. And now that Congress is back in session, some of those plans are making their way into the public record - and key lawmakers' ears.

To wit: The Senate Environment and Public Works committee convened a briefing in a Senate hearing room this morning, on the topic of "green" investments and their role in economic recovery.

Testifying before a crowd of fawning Democratic senators were a pair of hot names in energy circles: New York Times columnist Thomas Friedman, author of "Hot, Flat, and Crowded: Why We Need a Green Revolution - and How It Can Renew America," and clean energy venture capitalist John Doerr, whose track record includes investments in Google and Amazon.com.

Both men called clean energy development the solution to America's economic, environmental and national security challenges. They urged major tax incentives to help speed renewable technologies to competitiveness and big spending to build an infrastructure to carry renewable energy from the wind turbines and solar panels that produce it to the cities and suburbs that consume it.

by Frank James

Mark Brown, the Chicago Sun-Times columnist, argues President-elect Barack Obama should either tell Roland Burris directly, or have some tough-talking emissary (Rahm Emanuel perhaps), tell the senator-in-limbo to end his bid to be seated in the Senate.

Obama doesn't want to do that. He's got bigger fish to fry and would prefer to stand pat with what he's already done, which was to issue a statement from a safe distance saying Burris is a great guy but agreeing the Senate shouldn't accept an appointment made by a governor accused by federal prosecutors of selling the very same seat. While that was helpful, it's not enough. We need Obama's direct intervention.

But we're in a bind here, one created in part by Obama's run for president. He bears some responsibility.

by Frank James

Democrat Roland Burris should be seated by the Democratic-controlled Senate, says the highly regarded lawyer Walter Dellinger, who headed the Justice Department's Office of Legal Counsel in the Clinton Administration.

He makes the same logical case many others have. It boils down to the law is the law. An excerpt from his New York Times op-ed:

The Constitution's text is simple enough: "Each house shall be the judge of the elections, returns and qualifications of its own members." Since no one disputes that Mr. Burris, a former Illinois attorney general, possesses the constitutional qualifications of age, residency and citizenship, the remaining issue is whether the Senate can adjudge Mr. Burris not to have been properly appointed. Although federal prosecutors are seeking a corruption indictment of Mr. Blagojevich, he is in fact still the governor. The charges that he sought bribes to appoint certain candidates to the Senate do not automatically render illegal other official acts of his office like signing laws or pardoning criminals. And because there is no evidence that a bribe was solicited from, or proffered by, Mr. Burris, his appointment is presumptively lawful.

Postponing the decision until Mr. Blagojevich's removal and replacement by the lieutenant governor is not a clean solution either. Mr. Burris will argue that if his appointment was valid, Illinois law entitles him to the seat until the 2010 election. In his view, there would be no vacancy for the new governor to fill. Having two rivals, one appointed by each governor, disputing who is the rightful senator might be the worst possible outcome.

By Jim Tankersley

The U.S. Chamber of Commerce will urge Congress this morning to invest heavily in so-called "clean coal" research, to expand incentives for nuclear energy and renewable fuels, and to keep its hands off domestic oil and gas drilling.

The powerful business group will host its annual "State of American Business" speech this morning in Washington, and this year, the event is focused squarely on America's top problem: how to reignite the domestic economy.

The plan Chamber officials are set to unveil includes several energy-themed pieces. And it urges caution on what is shaping up to be a top priority for the incoming Obama Administration: cracking down on carbon emissions to fight global warming.

by Frank James

A lot of people who checked out the House hearing yesterday on Bernard Madoff's alleged Ponzi scheme probably got a little confused by something Rep. Gary Ackerman of New York said.

Ackerman, a Democrat, was castigating the Security Investors Protection Corp. chief executive and other government officials for not doing enough to protect investors when he said:

I'm trying to figure out what we got here. We got the president of the Securities Investor Protection Corporation, who's been that for the last six years. Security investor protection, it seems to me, hasn't protected any of the security investors.

And we have the inspector general of the Securities and Exchange Commission, which is the inspector of the watchdog agency that didn't watch out for anything, which makes you the Jacques Cousteau of the Keystone Kops.

That was a real head scratcher.

Jacques-Yves Cousteau was, of course, the world-renowned French ocean expert and co-developer of the aqualung who took us below the surface of the world's seas to reveal their wonders. Try as I might, I couldn't puzzle through what Ackerman was driving (or diving?) at with the Captain Cousteau reference.

by Mike Dorning and Mark Silva

Roland Burris of Illinois, rejected in his attempt to take a new seat in the Senate this morning, averted any public showdown by quietly accepting the refusal of his credentials inside the Secretary of the Senate's office on the third floor of the Capitol.

"My name is Roland Burris, the junior Senator from the State of Illinois," Burris told reporters later as he stood in the rain in a park outside the Capitol. "I was advised that my credentials were not in order."

The former attorney general of Illinois said he would take legal action, challenging the Senate's refusal, but averted any showdown at the door of the Senate chambers. "I am not seeking to have any kind of confrontation," Burris added.

Off the Capitol grounds where his entry to the Senate had been refused, Burris was left to his own - the Capitol police who had escorted him away from the Capitol leaving him to a press conference in the park.

A podium was set up in a park across the street from the Capitol outside the Russell Office Building.

Timothy W. Wright, a lawyer for Burris, said: "We have presented our credentials to the Secretary of the Senate... Our credentials were rejected by the secretary... We were not allowed to proceed to the floor... '' He, too, vowed to fight the case.

Burris got into a silver minivan with Massachusetts plates at 11:03 am EST and drove away. It was an Odyssey.

* * * *

Roland Burris patted a Capitol police officer on the back as officers escorted him through a throng of media outside, with a soft rain falling on the crowd this morning, after Burris left the office of the Secretary of the Senate where his credentials as the new senator from Illinois had been rejected.

Terrance Gainer, sergeant at arms and an old friend from Illinois, had escorted Burris in and out of the private rejection. (Pictured at left in photo below by Mark Wilson / Getty Images)

Two Capitol police cleared a way for Burris through a crowd of photographers.... "OK, clear it out... I don't want anyone in front of me,'' one officer called out.

Burris stopped to sign a photograph for a homeless man in a wheelchair. The man said, "Thank you very much sir.'' Burris shook his hand and said, "Thank you.''

Burris, too, was without a home this morning.

* * * *

The rejected Roland Burris was escorted outside the Capitol surrounded by media - stopped by the arrival of the motorcade of the vice president-elect, Joe Biden.

It was raining outside.

"We've been dripped on before,'' Burris said, while waiting (photo below by Charles Dharapak / AP).

* * * *

Presenting his credentials in a third-floor Capitol room where he could not be seen by the media, Roland Burris was on a floor where press photography is prohibited.

There would be no visual image of the Senate's rejection of the disputed appointee from Illinois, whom Senate leaders refused to seat because of the "cloud" surrounding the Illinois governor who appointed him.

But Burris - appearing calm, and accepting no questions -- left the secretary's office at 10:50 am EST escorted by the sergeant at arms, ushering him to an elevator as Capitol police barred photographers from snapping shots

They were saying that Burris would hold a press conference outside the Capitol .

* * * *

A determined Roland Burris entered the Secretary of the Senate's office on the third floor of the Capitol this morning to present his credentials. The media were gathered around the corner - several abreast stretching down the hallway, held back by Capitol police.

Terrance Gainer, the sergeant at arms who would be charged with blocking Burris at the Senate chambers door if necessary, escorted him into the office. The secretary's office is one floor above the entrance to the Senate chambers.

Leaders have been negotiating what Burris will do today - and there was some word that Burris might accept his rejection in the secretary's office. Guards initially had been told they were to treat Burris as they would a senator, easing his path through the Capitol entrance, but were later told to take him through security as any visitor.

"We've been back and fourth four times,'' a Democratic aide said of the choreography of the morning -- see how it all started, below the jump:

by Frank James

Reports that President-elect Barack Obama intends to make Leon Panetta director of the Central Intelligence Agency not only surprised some key Capitol Hill Democrats but left them questioning the former congressman and Clinton Administration official's bona fides for the post.

For instance, Sen. Dianne Feinstein of California, who will be the new chair of the Senate Intelligence Committee, didn't sound pleased. As CNN reported:

(CNN) -- Sen. Dianne Feinstein, the Senate's incoming Intelligence committee chair, slammed President-elect Barack Obama's choice of Leon Panetta as director of the CIA Monday.

"The President-elect will now have a chance to make his arguments," the spokesman said. "Her next move is to listen."

by Frank James

Minnesota's state canvassing board today certified that former comedian Al Franken, a Democrat, outpolled Sen. Norm Coleman, the Republican incumbent by 225 votes.

But the Coleman forces aren't about to give up. Here's an excerpt from a statement by Coleman for Senate counsel Tony Trimble:

The actions today by the Canvassing Board are but the first step in what, unfortunately, will now have to be a longer process. This process isn't at the end; it is now just at the beginning. We will contest the results of the Canvassing Board -- otherwise, literally millions of Minnesotans will be disenfranchised.

While we appreciate the effort of this board to do the work, the reality is that any certification of vote totals at this point is only preliminary. As this Canvassing Board has recognized, there still exist serious problems with inconsistencies in the administrative recount, and therefore in the validity and reliability of the numbers certified today. There can be no count that is accurate or valid when 654 potentially valid absentee votes remain disenfranchised and when some votes are counted twice - leading to a violation of one of the most sacred principles of our constitution - "One person, One vote."

by James Oliphant

Rick Pearson and Ray Long are two longtime observers of the Illinois political scene. So when the two Chicago Tribune reporters wrote this week that Roland Burris, Gov. Rod Blagojevich's pick for the U.S. Senate, "has always maintained an outsized political ego even larger than that required of most politicians," you could likely take their word for it.

Or, if you desire some empirical evidence, take a look at this. Perhaps Burris does belong in Washington. He already has a monument.

The website Politico posted this earlier this week, a photo of a grave that Burris has built for himself at Chicago's Oak Woods Cemetery. If you look closely at the left side of the monument, you'll see a list of Burris' "major accomplishments."

Decide for yourself if being named to the Senate by Blagojevich falls within that category.

by Mark Silva

Sources in Albany are telling the Associated Press that Caroline Kennedy will probably be the governor's pick to replace Sen. Hillary Rodham Clinton of New York.

Gov. David Paterson, who maintains he's still thinking about it, is likely to settle on the daughter of the late President John F. Kennedy, two sources close to the governor tell the AP. "They believe Carline Kennedy will be his choice,'' the AP reports, "but the governor cautions he's still looking.''

The New York Times has reported that during the traditional New Year's Day open house at the executive mansion in Albany, Paterson invoked the words of a legendary baseball umpire, Bill Klem, in noting that: "It ain't nothin' till I calls it."

by James Oliphant and updated

In a statement released minutes ago, Senate Majority Leader Harry Reid said Democrats would not allow Roland Burris, Gov. Rod Blagojevich's apparent choice as Illinois' next senator, to be seated as a member of the Senate.

Reid's statement makes good on a threat issued two weeks ago by the Democratic Caucus, which will hold a commanding majority in the new Senate, that anyone named by the embattled Illinois governor would not be allowed to take office. The U.S. Constitution arguably grants the Senate the power to bar Burris from assuming the position. However, in the past, that power has been used in the past only when the senator in question was elected through fraud or corruption.

In this case, there is no evidence that Burris, a former state attorney general, figured in any way in Blagojevich's alleged scheme to leverage Barack Obama's vacated Senate seat for personal gain. And Burris would be been appointed, not elected. But Reid said Tuesday that does not matter.

"It is truly regrettable that despite requests from all 50 Democratic Senators and public officials throughout Illinois, Gov. Blagojevich would take the imprudent step of appointing someone to the United States Senate who would serve under a shadow and be plagued by questions of impropriety," Reid said. "We say this without prejudice toward Roland Burris's ability, and we respect his years of public service. But this is not about Mr. Burris; it is about the integrity of a governor accused of attempting to sell this United States Senate seat. Under these circumstances, anyone appointed by Gov. Blagojevich cannot be an effective representative of the people of Illinois and, as we have said, will not be seated by the Democratic Caucus."

On Dec. 17, citing the threat from Senate Democrats, Blagojevich's lawyer, Ed Genson, said the governor would not be making an appointment. Blagojevich apparently did not receive that memo.

Blagojevich is set to announce the appointment of Burris this afternoon, according to the Chicago Tribune. The question now becomes whether Burris will accept the appointment, and then whether he would choose to somehow challenge the Senate action. An Illinois state legislative panel is also determining Tuesday whether to recommend the impeachment of Blagojevich.

UPDATE: According to a Republican source, a GOP senator could, theoretically, prevent Democrats from refusing to seat Burris, should it come to that. That's because a dispute could end up before the Senate Rules Committee, which would produce a resolution either accepting or rejecting Burris. That could mean a floor vote, which, under Senate rules, could be filibustered. Senate Democrats will not have the required 60 votes to override a filibuster.

Why would a Republican want to help Burris, a Democrat, end up in the Senate and give the Dems another vote? Hard to say. But a 71-year-old Blagojevich appointee with little statewide name recognition could make for a tempting opponent for Republicans when a election to fill the seat comes around in 2010.

by James Oliphant

The leading Republican in the House, Rep. John Boehner, is beating the January rush and indicating some early opposition to President-elect Barack Obama's ever-growing economic stimulus plan.

Obama has called for a package that is likely to exceed $700 billion in an effort to revive the stalled economy. He hopes investment in rebuilding infrastructure and eco-friendly businesses will spark the creation or preservation of as many as three million jobs.

Boehner (R-Ohio), who will lead a diminished minority in the House after last fall's elections, doesn't sound ready to scale the package that large. In a statement released Monday, Boehner said:

"The American people are facing tough economic times, and they expect Washington to act - but we must act in a responsible way that helps get our economy moving again, not with more pork-barrel spending that does nothing but give taxpayers' money to special interests and campaign contributors. Republicans are prepared to work with the incoming Administration and with Democrats in Congress to craft legislation that will help our troubled economy."

"But now reports indicate that Congress may be asked to pass a bill spending as much as one trillion dollars of the taxpayers' money in January. If that is true, I hope that the Democratic Leadership will agree that such a massive piece of legislation should be debated in a fair, honest, and open way. To that end, I would ask the Democratic Leadership to guarantee that such a bill will not be brought to the floor of the House unless there have been public hearings in the appropriate committees, the entire text has been available online for the American people to review for at least one week, and it includes no special-interest earmarks."

"Polls show that the American people know that more irresponsible spending on government programs isn't what the economy needs. Now is the time for Democrats and Republicans to work together on reforms that will unleash America's economic potential and help our economy create jobs, and I hope President-elect Obama and the Democratic Leadership in Congress will keep their campaign promises to work with us in an open and bipartisan way."

Boehner is referring to a strategy often employed by House Speaker Nancy Pelosi that bypasses committee chairmen in favor of having House leadership assemble a bill and then present it to the chamber as a whole on the floor for a vote. However, Pelosi's office has said that several key committees will play prominent roles in crafting the stimulus plan. We'll see how it plays out when the curtain rises next week.

by James Oliphant

Rep. Rahm Emanuel will resign his House seat Friday.

Emanuel, set to serve as chief of staff to President-elect Barack Obama, sent a letter to Illinois Gov. Rod Blagojevich Monday indicating that he planned to step down at the end of the week. The new Congress will be sworn in on Jan. 6.

Unlike the case of Obama's vacated Senate seat, Blagojevich has no power to appoint Emanuel's replacement. Instead, state law gives Blagojevich five days to set a date for a special election to replace Emanuel once the seat is officially vacant. The election to fill the seat on Chicago's North Side must be held within 115 days. The governor will likely set a date for a primary election as well, although the state statute doesn't require that he do so.

Emanuel took a surprisingly personal tone in his missive to Blagojevich, considering the nature of his communication with the governor's office regarding Obama's successor has been the subject of intense scrutiny. "As sons of immigrants to this country," Emanuel wrote, "you and I have a deep appreciation for the opportunities America provides to those who are willing to work hard and sacrifice for their children."

In the letter, Emanuel made no reference to allegations that Blagojevich put Obama's Senate seat "up for sale" and made no suggestion that the governor should resign. Blagojevich, ironically, once held the same seat representing Illinois' 5th District.

A bevy of Chicago Democratic politicians have lined up to compete for Emanuel's seat.

Emanuel's staff said Monday that his offices in Chicago and Washington, D.C. will remain open following the congressman's departure to respond to constituents with questions or problems. Day-to-day management will be assumed by the House clerk's office.

by Frank James

Former comedian Al Franken has a negligible 48-vote lead over incumbent Sen. Norm Coleman in the contest for the Senate seat from Minnesota. He had led by about 250 votes at the end of last week.

If those election lawyers up there are billing by the hour, this should have a very good Christmas, at least for them.

As the Minneapolis Star Tribune reports, both sides still have plenty to fight over and the recount's outcome is far from certain, including the final disposition of 1,500 absentee ballots.

The only thing that appears safe to say is the counting will stop New Year's Eve because that's when the Minnesota Supreme Court said it would.

by Frank James

Bernard Madoff, Wall Street's alleged Ponzi king, made political donations to Washington types which evidently bought him some access in here.

But it appears he had a light footprint in the nation's capital and I haven't seen a story yet that indicates his money (or his clients' money perhaps) was able to buy him anything more than a returned phone call or invitation to appear at a hearing. Not saying that it didn't. Just haven't seen any evidence of that.

As Andy Zajac and Janet Hook of the Tribune's Washington D.C. bureau reported:

... For years, Madoff was a generous political donor to mostly Democratic causes and maintained a steady lobbying presence through the government relations firm of a former New York congressman.

"It's a bit odd," Baker said. "I was a big player on market data fees and electronic exchanges"--two of the issues that Madoff's lobbying firm, Lent Scrivner & Roth, listed as advocating on for the New York mogul. "I don't remember having a visit or a discussion on these matters with the firm."

by Frank James

It appears that a lot of money gets thrown at top bankers in good and bad times. Some Associated Press reporters examined the Securities and Exchange Commission filings of banks that received federal bailout money from the $700 billion Trouble Asset Relief Program.

An excerpt of what they found:

Banks that have their hands out in Washington this year were handing out multimillion-dollar rewards to their executives last year.

Some banks trimmed their executive compensation in the face of faltering performance that foreshadowed the current economic crisis, but they still granted multimillion-dollar packages. Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.

Gov. Rod Blagojevich marches in the Indian community's Independence Day parade on Devon Avenue Aug. 16, 2003, in Chicago, with Raghuveer Nayak on his immediate left. (Alex Garcia/Chicago Tribune)..

by Frank James

We now know the Identity of the Rep. Jesse Jackson Jr. ally who mentioned in the federal criminal complaint against Gov. Rod Blagojevich as a Jackson "emissary" though the congressman has denied authorizing anyone to approach the governor about the vacant U.S. Senate seat. It's not exactly a household name.

According to a story by Chicago Tribune reporters David Kidwell and John Chase:

A key figure in Gov. Rod Blagojevich's alleged scheme to sell a U.S. Senate seat has sought immunity from federal authorities in return for his cooperation in their ongoing probe, the Tribune has learned.

Raghuveer P. Nayak, an Oak Brook businessman and political fundraiser, is the unnamed "Individual D" who prosecutors say was being squeezed by the governor for campaign cash in return for appointing U.S. Rep. Jesse Jackson Jr. to the Senate seat vacated by President-elect Barack Obama, sources said.

by Jim Tankersley

Barack Obama is done appointing his Cabinet. Now come the questions.

The Senate Environment and Natural Resources Committee announced today it will dive into confirmation hearings on Energy Secretary nominee Steven Chu and Interior Secretary nominee Ken Salazar. Chu's is scheduled for Jan. 13, a week after newly elected senators take office. Salazar's follows two days later.

Chu is a Nobel-winning physicist who directs the Lawrence Berkeley National Labratory. Salazar is a senator from Colorado and, technically, a member of the committee that will conduct his confirmation hearing. If you like the "Six Degrees" game, here's a quick academic link between the nominees: Chu is on extended leave from a professorship at Stanford University. One of Salazar's daughters is a Stanford undergraduate.

The committee press release hints at a fairly smooth ride for both men.

by Frank James

The Minneapolis Star Tribune has a useful widget on its website which provides the latest vote count in the Senate race between Republican incumbent Sen. Norm Coleman and challenger, Al Franken, the former comedian.

The current count has Franken leading by 266 votes, the first time he's been ahead. Franken received a boost yesterday when a court ruled that contested absentee votes had to be counted.

Just a few days ago it looked like Coleman would hang on to win. Now it's anyone's guess.

by Mike Dorning and James Janega

Barack Obama told reporters today to wait until he's out of town on Christmas vacation in Hawaii for answers to questions on his advisers' dealings with Illinois Gov. Rod Blagojevich.

Asked at a press conference moments ago about how he squared his commitment to transparency in government with the tight-lipped response he and his advisers have had to questions about their dealings with the scandal-tarnished governor, Obama said that it has been "frustrating" to maintain silence but that the questions will be answered next week--which happens to be when he will be in Hawaii on break.

"It's a little bit frustrating. There has been a little bit of speculation in the press that I would like to correct immediately. We are abiding by the request of the U.S. Attorney's office," Obama said. "But it's not going to be that long. By next week, you guys will have the answers to all of your questions."

As Obama spoke, his political advisor David Axelrod and chief of staff designate Rahm Emanuel watched from the margins of the room. Axelrod stood motionless, hands on hips, a frown partially hidden by his moustache and his attention laser-focused on Obama as he spoke. Emanuel, who was checking a message on his Blackberry when the question was asked, smiled in faint amusement, put the Blackberry away and watched the rest of Obama's response with his legs crossed at his ankles, arms crossed and a single finger pressed across his lips. He was still smiling.

by Frank James

Caroline Kennedy has evidently decided she wants U.S,. Senate seat from New York to be vacated by Sen. Hillary Clinton who was chosen by President-elect BaracK Obama to be his secretary of State.

This is not a happy day for a lot of other New York Democrats like Rep. Carolyn Maloney or Andrew Cuomo, the state's attorney general, who have either openly said they want the seat or have been pushed for it.

Because of her name, Kennedy is about as big a political big foot as they come. With virtually 100 percent name recognition and, more than that, a name that exerts a strong emotional tug still on many Democrats, she has about as close to a lock on the appointment as is possible.

It's hard to see Gov. David Paterson saying no to her, especially since if he appointed her to the Senate, New York would suffer no loss in star power when it comes its junior senator.

by Janet Hook

The collapse of legislation to bail out the U.S. auto industry is a fitting end to this year in Congress -- and a warning to President-elect Barack Obama that even larger Democratic majorities next year won't guarantee smooth sailing for his ambitious agenda on economics and other issues.

Polarized, beset by crises, and preoccupied with ideological and regional politics, this Congress followed a pattern all too familiar in the past decade. It railed and wrangled over the nation's toughest problems, but in the end failed to advance solutions.

From healthcare and costly dependence on foreign oil to the greatest economic crisis in more than half a century, the House and Senate have floundered into stalemate. Meanwhile, the economic woes have gone international.

The House and Senate this year did pass major legislation in response to the nation's economic problems -- but for the most part, they waited to act until a crisis could hardly be ignored. Each time, lawmakers had to struggle to reach agreement. Sometimes, as in the auto bailout, the legislation was not even approved.

See the rest of the story on Obama's congressional challenge in the Los Angeles Times and here in the Swamp:

by James Oliphant and Richard Simon

Since President-elect Barack Obama laid out plans for the largest injection of federal spending into the economy since the New Deal, just about everyone has started angling for a piece of the action.

With estimates of the package, which will be considered by the new Congress starting in January, topping out at anywhere between $500 billion and $1 trillion, ailing sectors such as home builders and sellers, airlines, railroads -- and, yes, the auto industry -- view the stimulus as a means to get healthy again.

That includes the air conditioning industry, America's libraries and even catfish farmers.

All of them, and many more, have deployed lobbyists to Capitol Hill in hope of benefiting from the spending spree.

"The ever-increasing cost of the yet-to-be-seen stimulus is like chum in the water for lobbyists circling to snap up some taxpayer cash for their clients," said Steve Ellis of Taxpayers for Common Sense, a watchdog group.

The primary goal of Obama's stimulus is job creation. His plan, he says, could lead to 2.5 million new jobs by 2011 and rebuild the nation's crumbling infrastructure, make school buildings more energy-efficient, modernize hospitals and extend broadband to underserved areas.

But so far, Obama has offered little in the way of specifics or a price tag. That is an opening for industry groups with no shortage of suggestions.

"It's not very often business and government run on parallel tracks," said Jerry Howard, chief executive of the National Assn. of Home Builders. "You've got to spend money to make money."

See the rest of the story on Obama's economic stimulus and the lobbying it has stimulated in the Los Angeles Times, the Chicago Tribune, other Tribune Co. newspapers and here in the Swamp:

by Frank James

There's a lot of suspicion in Washington and throughout the nation that Senate Republicans who thwarted the auto bailout last night were operating from a range of motives, including a desire for payback against the United Auto Workers,

The UAW has been the bane of Senate Republicans, throwing resources and people at defeating Senate Republicans, including no less than Senate Minority Leader Mitch McConnell of Kentucky in his recent reelection campaign.

Senate Republicans and organized labor have also been in a pitched battle over legislation that would make it easier for unions to organize workplaces without holding elections featuring secret ballots. Republicans have said the "card check" legislation would allow union heavies to strongarm workers into joining unions against their will.

Organized labor meanwhile has said anti-labor Senate Republicans want to make it harder for unions to organize, including in southern states. Senate Republicans have made it clear that the battle over the legislation will be one of the defining issues of the next Congress.

by Frank James

Dan Rostenkowski has forgotten more about political wheeling and dealing than most people will ever know.

So it's worth listening to the former congressman from Illinois and House Ways and Means Committee chairman who knows what it's like to be caught in a political and legal scandal, to be convicted on federal charges and to serve prison time.

He also has the years between his humiliation in the early 1990s and now to have a useful perspective.

Writing in The Daily Beast, Rostenkowski wants it known that Gov. Rod Blagojevich, who once occupied Rostenkowski's old House seat, doesn't represent Illinois's political class or politicians generally.

It is painful to recall my situation and, on a personal level, I can sympathize with the pain the governor's family must feel and can uniquely understand their concerns about what comes next.

But I find his reported behavior troubling. There's a big difference between running a sloppy office and staging a personally-beneficial auction to make policy and personnel decisions. That's what disturbs the public. It bothers me, too.

by Frank James

One of the stumbling blocks that reportedly caused the Senate to fail to pass the auto-bailout legislation was Senate Republican demands that the United Auto Workers at the Detroit Three auto plants get their wages to parity with workers at Toyota and Honda.

But just what is the divergence between the wages paid by the Detroit Three and those paid by the foreign transplants?

It's been said often that workers at the Detroit Three make more than $70 hourly while those at the foreign transplants are somewhat north of $40 an hour.

But as the New York Times' David Leonhardt recently pointed out, this is isn't true.

Let's start with the numbers. The $73-an-hour figure comes from the car companies themselves. As part of their public relations strategy during labor negotiations, the companies put out various charts and reports explaining what they paid their workers. Wall Street analysts have done similar calculations.

The calculations show, accurately enough, that for every hour a unionized worker puts in, one of the Big Three really does spend about $73 on compensation. So the number isn't made up. But it is the combination of three very different categories.

by Frank James

Now that Senate Republicans have foiled the Detroit 3 bailout in a late-night vote, any hope for a bailout falls to Treasury Secretary Henry Paulson Jr.

According to lawmakers on both sides of the aisle, the Emergency Economic Stabilization Act which created the $700 billion fund known as the Troubled Asset Relief Program, or TARP, could be used for the $14 billion bridge loan to the Detroit-based automakers.

In recent weeks, Paulson has resisted the idea of using TARP funds shouldn't be used for a Detroit rescue since it was created to provide liquidity to the financial sector.

But it may prove impossible for Paulson, and by extension President Bush, to remain purists on this as fears grow that a bankruptcy by one or more of the Detroit automakers could trigger a cascade of horribles and unintended consequences that could prove a devastating blow to an already sickly economy.

by James Oliphant

The prospect of a general election to select Illinois next senator has added some new potential candidates to the mix, ones who have not been involved in the Blagojevich scandal.

On the Republican side, Rep. Mark Kirk, who represents the 10th district in the north suburbs of Chicago, and is a proven fundraiser with a moderate message, has said he would take a look at running.

As for the Democrats, Rep. Melissa Bean, another strong fund-raiser from the northwest suburbs, is hearing calls to jump in should the Illinois General Assembly pass legislation establishing a special election, which would likely be held next spring. Rep. Jan Schakowsky, who also hails from the north side, is interested in running, as well.

A special election will already be necessary to replace outgoing Rep. Rahm Emanuel, once he formally resigns from the House to serve as President-elect Barack Obama's chief of staff. It's possible the two elections could be combined.

Such an election provides already-elected House members with major advantages they would not enjoy if Gov. Rod Blagojevich or his successor makes an appointment. For one thing, they wouldn't have to leave their current seats to make a Senate run. Another is that they could use federal campaign money--either their own or from their respective parties--in a Senate contest.

by Frank James

It looks like the nation may be very close to running an experiment to find out what happens when it loses one or more of its legacy automakers during the worst economic downturn since the Great Depression.

All indications are that the $14 billion rescue package drafted by the White House and congressional Democrats to save the Detroit 3 automakers will not have enough votes in the Senate since even some Democrats appear unwilling to vote for the legislation that has emerged.

And this is despite General Motors' warnings that it will burn through the last of its cash by the end of the month at which point it will be forced to file for Chapter 11 bankruptcy protection.

For the bill to have a chance at passage, it would likely need Sen. Mitch McConnell, the Senate Minority Leader, to support it or at least not to vociferously oppose it.

But he is very much opposed and has loudly stated his reasons on the Senate floor earlier today.

"Some argue that the effects of an auto industry collapse would be too acute and far-reaching for an already-struggling economy to bear. This is impossible to know. And even if we grant that these companies would fail without taxpayer help, we would still have to ask ourselves whether the proposal before us achieves the goal that everyone claims to embrace -- namely, the long-term viability of ailing car companies -- and, in my view, it does not.

by Frank James

Neel Kashkari, the Treasury official who oversees the Bush Administration's effort to inject money into the financial system, was hammered yesterday by House members over a large bonus payment to executive of AIG, an insurance company 80-percent owned by U.S. taxpayers.

Rep. Brad Sherman, a California Democrat, and Rep. Don Manzullo, an Illinois Republican, lit into Kashkari over a $3 million bonus to an AIG executive, just one of 130 AIG managers getting "retention" payments.

Sherman noted that the legislation that created the Troubled Asset Relief Program requires Treasury to set "appropriate" standards for pay and he repeatedly asked Kashkari if $3 million fit the Treasury official's idea of "appropriate."

Kashkari couldn't really answer the question. And how could he? What expertise does the federal government have at setting the pay for the executives of giant financial firms?

It's understandable why lawmakers placed limits on executive pay, especially when taxpayers have put $60 billion of their money into the company.

by Frank James

As expected, the House approved a $14 billion bailout package for the Detroit Three last night. That's the good news for auto workers, dealers, suppliers, communities, local media and all the others constituencies dependent on them.

But the Senate, of course, is another matter. Republicans there are more than balking. Some are openly hostile to the plan, despite warnings from many that a bankruptcy of one or more of the automakers could spell doom for an already moribund economy.

Jim Puzzanghera and Janet Hook of the Tribune's Washington Bureau captured the flavor of the debate taking place yesterday:

"The consequences of defeating this bill would be disaster for the economy that is already in trouble," House Financial Services Committee Chairman Barney Frank (D-Mass.) told his colleagues during the debate. The vote was 237-170, with 32 Republicans joining 205 Democrats in supporting it.

"People are rightly concerned that the automakers and unions won't follow through. Many simply don't believe that the changes that need to be made will be made," Sen. John Sununu (R-N.H.) said after the meeting.

by Frank James

Rep. Jesse Jackson Jr. held a Capitol Hill press conference to assert that he didn't participate in Gov. Rod Blagojevich's alleged scheme to sell the Senate seat vacated by President-elect Barack Obama.

Jackson, who's been openly interested in the seat, said he had no idea Blagojevich didn't plan on choosing Obama's replacement based on credentials but rather on what federal prosecutors allege was Blagojevich's desire to essentially auction the seat to the highest bidder.

Jackson has been identified as "Senate Candidate Five" in the criminal complaint against Blagojevich and his top aide John Harris. The complaint has Blagojevich saying that SC5 promised to raise $1 million for Blagojevich if he was named to the open Senate seat.

Jackson said:

I did not initiate or authorize anyone at any time to promise anything to Governor Blagojevich on my behalf. I never sent a message or an emissary to the governor to make an offer, to plead my case or to propose a deal about a U.S. Senate seat, period.

Clearly, I was badly mistaken. I did not know that the process had been corrupted. I did not know that credentials, that qualifications, that a record of service meant nothing to the governor. I did not know that the governor and his cronies were attempting to use the process to extort money and favors in a brazen pay-to-play scheme.

by Frank James

Blago # 5 is not a fragrance but Rep. Jesse Jackson Jr. who is the "Senate Candidate 5" mentioned repeatedly in the criminal complaint against Gov. Rod Blagojevich and his top aide John Harris.

The complaint quotes Blagojevich as saying someone representing SC5 offered to raise $1 million if Blagojevich appointed SC5, or Jackson, to the Senate seat vacated by President-elect Barack Obama.

Jackson denies any wrongdoing and the lawyer he's hired to represent him in discussions with the federal government makes the same denials.

Jackson is just one of probably many Illinois politicians who have some added anxiety right now, hoping that the angel of doom, otherwise known as U.S. Attorney Patrick Fitzgerald, passes over them.

An excerpt from the story on Tribune's "Breaking News" blog.

U.S. Rep. Jesse Jackson Jr. (D-Ill.) is "completely guiltless" in the alleged scheme to corrupt the appointment of a new U.S. senator from Illinois and will meet with federal investigators as soon as Friday, the congressman's newly hired attorney said today.

Jackson was not named in the criminal complaint yesterday charging Gov. Rod Blagojevich with trying to sell the Senate seat vacated by President-elect Barack Obama. But descriptions in the court document fit the congressman's profile and sources have further identified him as the "Senate Candidate 5" who was among those being considered for the job.

by James Oliphant

The office of Sen. Harry Reid, the Senate majority leader, is circulating a letter Wednesday to the Senate Democratic Caucus for signatures that recommends Gov. Rod Blagojevich resign and under no circumstances make an appointment to fill Illinois' vacant Senate seat.

The letter contains a threat to the governor, saying that the Senate is poised to use its power to refuse to seat any appointment Blagojevich makes.

The text of the letter is as follows:

December 10, 2008

Dear Governor Blagojevich:

We write to insist that you step down as Governor of Illinois and under no circumstance make an appointment to fill the vacant Illinois Senate seat.

by Frank James

All of those waiting to see if there'll be an auto bailout vote today in the Senate can stand down.

Senate Minority Leader Mitch McConnell says there'll be no vote on the bailout today:

Here's the statement he made on the Senate floor:

"Republicans were told last night that an agreement had been reached between Congressional Democrats and the White House on an auto package.

"But let me be clear: there will be no vote on this legislation today. On a bill this critical, with so much taxpayer money at stake, we cannot rush this through without adequate review.

By Jim Tankersley and Andrew Zajac

It's a quote likely destined for political infamy: A Senate seat, Illinois Gov. Rod Blagojevich allegedly said, "is a (expletive) valuable thing, you just don't give it away for nothing."

But if federal prosecutors' allegations are true, Blagojevich was set to give one away for far less than market value.

The feds arrested Blagojevich today on corruption charges including allegations that he put a "for sale" sign on the former Senate seat of President-elect Barack Obama. The criminal complaint prosecutors filed today, based heavily on taped conversations between the governor and his aides, lists several potential price tags floated by Blagojevich and co. It includes a cabinet appointment, up to $1 million in campaign contributions and lucrative employment for the governor and his wife.

by Frank James

If and when the federal government gives the Detroit Three billions of dollars in an effort keep them from collapsing, it only makes sense that federal policymakers would want to have oversight to prevent taxpayer money from being wasted.

That's particularly true after the widespread dissatisfaction with how the financial industry rescue has gone, with banks largely sitting on the $350 billion they're received to date instead of making new loans.

But here's the rub. Oversight means the federal government has to get involved in the manufacturing of cars to a degree that some are calling it nationalization since it will be the government, not the market that will be driving, so to speak, a lot of the decisions.

This remarkable situation is examined by David Sanger in the New York Times today as he lays out the potential pitfalls inherent in an auto bailout that places federal policymakers in what would normally be the role a corporate board.

The first, of course, is the one the president-elect himself highlighted. Government's record as a corporate manager is miserable, which is why the world has been on a three-decade-long privatization kick, turning national railroads, national airlines and national defense industries into private companies.

by Frank James

So do you still get to pick the Senate replacement for President-elect Barack Obama if you've been arrested on federal corruption charges as Illinois Gov. Rod Blagojevich was today?

Some pretty stunning allegations are being made by federal prosecutors, including U.S. Attorney Patrick Fitzgerald. According to a story on the Chicago Tribune's Breaking News site:

On the issue of the U.S. Senate selection, federal prosecutors alleged Blagojevich sought appointment as Secretary of Health and Human Services in the new Obama administration, or a lucrative job with a union in exchange for appointing a union-preferred candidate.

Blagojevich and Harris, along with others, obtained and sought to gain financial benefits for the governor, members of his family and his campaign fund in exchange for appointments to state boards and commissions, state jobs and state contracts.

by Frank James

If you thought the Republican war against ACORN ended on Election Day passed, you would be wrong. Very wrong.

House Minority Leader John Boehner of Ohio is demanding that the Housing and Urban Development Department withhold $17.2 million in funding from the controversial group which Republicans accused of voter fraud on behalf of Democrats, including President-elect Barack Obama, during the presidential campaign. ACORN also fell under suspicion because of financial wrongdoing and mismanagement, including an embezzlement it didn't report.

Worth nothing In Boehner's press release, in which he urges HUD not to give ACORN the funds until congressional hearings occur, is Boehner's implication of ACORN, Fannie Mae and Freddie Mac in much of the financial and economic meltdown.

It's a theory of the cause of the problem that's not accepted by most reputable experts on the crisis. But it has become an article of faith among many conservatives that ACORN and the government sponsored entities brought down the global economy by pushing for mortgages to low-income home buyers who couldn't afford them.

by Frank James

Steve Ellis of Taxpayers' for Common Sense has gotten a copy of the auto bailout legislation resulting from negotiations between Congress and the White House. Here's what his quick early take:

We just got it and are looking through it, but here is what we found so far:

It taps the existing $25 billion auto loan guarantee program created under the Energy bill. It also has a repayment structure (5 percent for 5 years, 9 percent after) similar to the bank investments under TARP. The starting point is the restructuring plans submitted by the companies on December 2, with a January 1 progress assessment due. Shorter term periodic reports are due upon release of the loans, every several days.

by Frank James

Looks like we could have an auto bailout deal between the White House and Congress by the end of the day.

As Jim Puzzanghera of the Tribune Washington bureau reports:

WASHINGTON - The White House said Monday morning it's "very likely" a deal will be reached today with Congress on a short-term bailout package for U.S. automakers.

Negotiations between the Bush administration and House and Senate Democratic leaders resumed Monday after a breakthrough Friday night on the source of the funding, said White House spokeswoman Dana Perino. The broad plan calls for about $15 billion to keep General Motors and Chrysler afloat until March 31. GM has told lawmakers it needs $10 billion and Chrysler has said it needed $4 billion for the period. Ford, the other of Detroit's Big Three, said it does not need any funding immediately, but said a failure by GM or Chrysler could cause it to fail as well because of numerous shared suppliers and dealers.

Republican Anh 'Joseph' Cao holds daughter Betsy, 4, at his victory party after defeating Rep. William Jefferson, D-La., for the 4th Congressional District in New Orleans Saturday, Dec. 6, 2008. (AP Photo/Alex Brandon)

by Frank James

In something of a surprise, Rep. William 'Cold Cash' Jefferson, the indicted Democratic congressman from New Orleans, was defeated by Anh "Joseph" Cao, a Republican lawyer who will become the first Vietnamese-American in Congress.

What made Jefferson's defeat news was that his district is so overwhelmingly Democratic that many observers just assumed he'd win re-election on that basis alone.

Here's an excerpt from a story on the WWLTV.com, a New Orleans television station with election details:

Anh 'Joseph" Cao received 33,122 votes, or 49 percent to Jefferson's 31,296, or 47 percent in the race for the Second Congressional District seat from Louisiana. He becomes the nation's first Vietnamese-American Congressman.

"I'm sure some people thought I'd already won," he said. "Many did not vote. Most of the people in the district supported us. I think some just ran out of gas."

Caroline Kennedy waves to the crowd after stumping for then Sen. Barack Obama at the Wilkes University student center in Wilkes-Barre, Pa., Sunday, Nov. 2, 2008. (AP Photo/Kristen Mullen, The Citizens' Voice)

by Frank James

It's easy to understand some of what must be tugging on Caroline Kennedy, President John F. Kennedy's daughter who, according to reports, is considering seeking the Senate seat from New York being vacated by Sen. Hillary Clinton, President-elect Barack Obama's choice to be his secretary of state.

A Kennedy has served in the Senate since 1952 when her father was first elected to the body, with only a brief interruption after JFK was elected president.

But her uncle, Sen. Edward Kennedy has an incurable brain cancer and is 76. The easiest way to ensure that the Kennedy Senate tradition continues would be for her to have New York Gov. David Patterson appoint her to fill the seat.

Of course, the seat being vacated by Clinton was once occupied by Kennedy's other uncle, Robert F. Kennedy, so that's quite possibly another draw.

by Frank James

At a time when we're desperately searching for things to laugh about, especially with the economy swooning, Rep. Ileana Ros-Lehtinen has given us something to smile about.

Who could not like the story about her repeated phone hang ups on President-elect Barack Obama and his chief of staff Rahm Emanuel? She didn't want to be played for a fool by what she thought were impersonators who would air her gullibility on a radio show, as happened to Alaska Gov. Sarah Palin.

So she hung up. Again and again. She has since apologized.

A lot of people are evidently more upset about this than Obama was. Her office has been fielding numerous angry callers who believe she hung up on Obama intentionally, according to an Associated Press story. Presumably, her staff isn't hanging up on those callers.

by Frank James

The Big Three auto makers take their pleas for an auto industry bailout to the House side today and as we saw yesterday after the Senate's hearing, it's far from certain they will get the $34 billion in taxpayer-subsidized bridge loans they're seeking.

They may get some perverse help from the economy today, with the Labor Department reporting this morning that the nation lost more jobs in November, 533,000, than economists had expected, more than anytime since 1974.

The Detroit Three employ 250,000 U.S. workers. GM alone has 100,000. So the November job loss figures could perhaps ease the resistance of some lawmakers who've been dubious about the bailout.

And even after yesterday's contrite appearances by the newly humbled auto chief executives, there still were lawmakers who remained to be swayed.

As Tribune Washington reporter Jim Puzzanghera reports:

But skepticism remained high on Capitol Hill during a hearing of the Senate Banking Committee, with lawmakers questioning Detroit's commitment to becoming more competitive and worrying that the taxpayers' money would quickly be frittered away.

"In just two short weeks the price tag has jumped from . . . $25 billion to $34 billion," said Sen. Richard C. Shelby of Alabama, the Banking Committee's top Republican. "I'm interested in hearing what changed and why we should believe things will get better."

by Frank James

It was the question the chiefs of the Big Three automakers knew was coming and they were ready. How did they get to Washington and how did they plan to return home?

They knew it was part of the penance they'd have to pay for being so disconnected to public appearances that they separately flew to Washington on their private jets in November to ask for a taxpayer bailout of their companies.

It was Sen. Richard Shelby, a Republican from Alabama, who, hours into the hearing, asked the question.

SEN. SHELBY: You flew up here before, I understand that. And you drove up here. Did you drive or did you have a driver? Did you drive a little and ride a little? And secondly, I guess, are you going to drive back? Because if you are, some of us might want to ride back with you.

SHELBY: Now wait a minute Sen. Dodd. I'll let you ask that question. The chairman wants to make light of it. But I can tell you this, are you planning to drive back? In all the press releases, I saw you drove up here.

All the auto CEOs said they drove to Washington and planned to drive back. All three, Bob Nardelli of Chrysler, Alan Mulally of Ford and GM's Rick Waggoner all split the driving duties with other drivers with Waggoner saying he planned to drive back himself tomorrow or Saturday.

It turned out to be one of the few moments of levity in a lengthy hearing that was generally fairly sobering.

by Frank James

First it was $25 billion to bailout the auto industry. Then, once the Big Three automakers submitted their plans to Congress, it was $34 billion.

Now, we've head Mark Zandi, chief economist at Moody's Economy.com, say at the Senate Banking Committee hearing that's still in progress that for a bailout to really work to save the Big Three, an effective bailout would have to be more like $75 billion to $125 billion in size.

Zandi, who's testifying today along with the auto executives, says $34 billion would only get the Big Three through the next few months. The higher range would be needed to get the companies through the next few years, especially if the automakers' annual sales come in around 10 million to 11 million vehicles compared with the 17 million units they were manufacturing annually before the bottom fell out of the auto market.

Needless to say, Zandi's numbers caught the attention of lawmakers who aren't too happy at the thought of a $34 billion bailout let alone one that, to be effective, might need to be more than twice as large.

by Frank James

The Big Three automakers are in Washington for the first of two congressional hearings this week, appearing before the Senate Finance Committee today and a House committee tomorrow.

In his opening statement Sen. Chris Dodd, chair of the committee, raised one of the most compelling reasons to help the auto industry. Call it the unintended consequences if no help is given.

Dodd uttered three words that should strike horror in the hearts of most Americans by now but probably doesn't: credit default swaps.

These are the financial weapons of mass destruction, as Warren Buffet might call them, that could wreak havoc on an already severely damaged economy.

Speculators used these swaps to place bets on the relative likelihood of some companies defaulting on their debts.

If companies default, holders of CDS on those companies have to be paid by those obliged to pay those CDS obligations.

These CDS are scattered across the financial system and many fall into the category of toxic assets. Indeed, one reason banks are hoarding cash is because they're worried about the CDS on their books as well as those held by other banks, insurers etc.

So if the Big Three default, the repercussions to an already weakened financial system could be disastrous, as Dodd pointed out.