Barack Obama met with Senate Democrats for the last time Tuesday before next week's inauguration.

Dana Bash | BIO
Senior Congressional Correspondent

Consider the irony here: Barack Obama is finally spending his political capital, and he's using it on a joint effort with President Bush, to fight fellow Democrats in Congress, for a wildly unpopular Wall Street bailout.

And a full week before taking office, he even came to Capitol Hill to remind Democrats he's going to have a veto pen, and he's not afraid to use it.

I talked to more than a dozen Senate Democrats, and it was abundantly clear why he had to go to such extremes. They despise the idea of spending an additional 350 billion taxpayer dollars on what they view as a mismanaged rescue program.

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Barack Obama met with Senate Democrats for the last time before next week's inauguration.

Dana Bash | BIO
CNN Sr. Congressional Correspondent

This is all from various Democratic senators I talked to leaving the meeting:

- Obama told Democrats he would veto the disapproval resolution if he had to.

- He took about 15 questions, many of which were from skeptical Democrats about TARP. He repeatedly promised to make this process more transparent.

- He also made clear he does NOT want to be doing this out of the gate, but insisted he has no choice.

- Banking Committee Chairman Chris Dodd made a point of reminding fellow Democrats what a bad political situation it would be to pass the disapproval resolution and force Obama to use his veto pen on THAT as one of his very first acts.

- Some Democrats said they felt more comfortable, but many also said they still have a lot of questions and are still unsure how they will vote on TARP.

Program note: Tune in to 360° tonight for more on the drama surrounding Blagojevich’s Senate appointment.

Gov. Rod Blagojevich and Roland Burris

Dana Bash
CNN Sr. Congressional Correspondent

WASHINGTON (CNN) Senate Democrats have no choice but to change their tone because Illinois Gov. Rod Blagojevich “called our bluff” in appointing someone over their objections, a senior Democratic congressional source conceded Wednesday.

“We tried to send a political signal to Blagojevich that we would not seat someone he appointed. He called our bluff, in a reckless way,” said the Democratic source.

A second senior Democratic source said it had clearly become a “heightened situation” that needed to be dealt with and that Burris’ face to face meeting with Senate Majority Leader Harry Reid and Majority Whip Dick Durbin really helped to establish a “person to person dialogue.”

A third senior Democratic source simply demurred that Democrats changed their tone after they “looked more into the situation.”

It is also noteworthy that Reid and Durbin went out of their way, unsolicited, to note this matter was not about race, noting that Burris himself had told them that

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Dana Bash and Ted Barrett
CNN Capitol Hill Team

The auto bailout bill is set to die in the Senate Thursday night after the collapse of talks aimed at fashioning a compromise between Democrats and Republicans, sources said.

A cloture vote - requiring 60 votes to end debate and move to a vote on the actual bill - will be held shortly and is expected to fail.

The chief executives of ailing automakers GM, Chrysler and Ford testify before Congress last week

Sources: White House warning GOP senators Wall Street bailout funds might be used for automakers.

Dana Bash
CNN Congressional Correspondent

Two Republican congressional sources tell CNN that Bush officials have been warning wavering Republican senators that if they don't support legislation to bailout big three automakers, the White House will likely be forced to use money passed for the Wall Street bailout, something the White House and Treasury Secretary Henry Paulson have refused to do.

 The sources asked not to be named because of the sensitivities of private conversations.

The White House negotiated a deal with Democrats to give Detroit a short term loan with strings attached, including a so-called "car czar" charged with helping the companies draw up restructuring plans. Most Senate Republicans opposed the plan as too weak in terms of focusing long-term viability for the U.S. auto industry.

As part of their full-court press to urge skeptical Republicans to back it, they made clear that if Congress didn't act, the White House would have to step in to save Detroit from collapse with funds from the $700 billion Troubled Asset Relief Program (TARP), according to the sources familiar with the conversations.

 One of the sources said the a White House official made clear to a GOP Senator that would be the worst option, because the loan could go to the auto companies with few or no requirements along with it.

 Democrats had pressed the White House from the start to help Detroit by using some of the 700 billion dollars for the financial sector, but the White House had refused.

 Talks are currently underway on another compromise auto bailout bill, so the White House threat may be moot.

 But it is noteworthy that Bush officials apparently raised the idea of using TARP money in some private conversations with skeptical Republican Senators.

Dana Bash, Ted Barrett and Deirdre Walsh
CNN Capitol Hill Team

House Democratic leaders and White House negotiators finalized an agreement on a 15 billion dollar auto bailout, and House Democratic leaders are moving to bring it to a vote.

The agreement between negotiators was finalized Wednesday morning after Democrats agreed to a Republican demand that they drop a provision blocking Detroit from filing lawsuits on greenhouse gas emissions.

House Democrats are meeting this morning to discuss the measure. House Democratic leaders are hoping to hold a vote Wednesday, but the timing is still up in the air.

Meanwhile, Senate Majority Leader Harry Reid announced “it appears unlikely” that the Senate will vote today on the auto bail out legislation. That is because the final text of the 25-page bill is not completed and Senate Republicans have told him they want to study it before deciding how to proceed.

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Dana Bash
CNN Congressional Correspondent

As negotiators move closer Tuesday evening to a compromise bill to bailout Detroit (see note from Ted and Deirdre) a small group of Senate Republicans are signaling they will try to slow its passage.

GOP Senator John Ensign said Tuesday he will filibuster the auto bailout unless there are major changes in the compromise that Democrats and the White House are close to forging.

An Ensign aide tells CNN that he will hold a press conference at noon Wednesday with about half a dozen GOP senators who intend to support his move.

It is important to note that even GOP opponents concede that the auto bailout may likely have the 60 votes to pass, but these GOP senators are trying to “slow the trains down to make a point,” according to the Ensign aide.

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Dana Bash | BIO
CNN Congressional Correspondent

If we had a dime for every optimistic word we hear about compromise for Detroit, we may be able to make enough money to bailout the auto industry ourselves.

"In concept, it's together" House Majority Leader Steny Hoyer told reporters as he rushed into an all day summit on the economy.

House Financial Services Chairman Barney Frank declared there will be "agreement today, absolutely.”

"I think we're very, very close to having something we can bring before the body sometime today," Senate Majority Leader Harry Reid said as he opened the Senate floor this morning.

At 10:30am he even said he thought there could be agreement "within an hour or so."

Now, part of the art of compromise on Capitol Hill is, and always has been, mastering the art of posturing. Public expressions of good will and optimism are designed to move things along in private.

But, Republican leaders are still trying to recover politically from rushing through the Wall Street rescue. They're wary of another drive-by bailout for the auto industry.

In fact, Sen. Mitch McConnell was on the Senate floor this morning trying to tap the brakes on an auto bailout.

"There are times when help is needed but one thing most people expect when they are asked for help is that the one asking makes a commitment to change," said McConnell.

"This proposal does not go nearly far enough. It holds neither management nor labor truly accountable."

The White House has the same concerns, and they had staff working with congressional Democratic aides late last night and early this morning trying to work them out.

The big question when they finally come out of the room and declare the deal done, whether there will be enough votes to pass a Senate that is still split along party lines, and suffering from a big case of bailout fatigue.

But it’s hard to imagine Senate leaders bringing this to the floor unless they know they have the votes. They are still smarting from the precipitous stock plunge they caused after initially failing to pass a financial bailout this fall.

Reid was almost giddy about the positive effect their negotiations had yesterday.

"The mere fact that we were trying to work something out yesterday caused the stock market to go up nearly 300 points," he said.

Dana Bash
Congressional Correspondent

Anyone walking by the Capitol steps this morning saw one of the first real images of the change that's coming to Washington. Some 50 fresh-faced, newly-elected lawmakers were all smiles as they posed for their class picture.

But, that belied what was happening inside the halls of Congress.

It’s business as usual: Gridlock.

The old Congress is back in town this week for a lame-duck session, and the auto industry is begging lawmakers to avoid financial collapse.

But, calls for emergency assistance to Detroit are colliding with a partisan divide over where the money should come from.

On the Senate floor, we heard big speeches from the leadership about the need to work together.

Still, we could find no evidence that either side is sitting down to talk about how to bridge their differences on helping the auto industry.
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Dana Bash | BIO
CNN Political Correspondent

Trying to get more info, but I'm told by one Republican source here at the GOP Governors Association meeting that as of 830a , Gov. Sarah Palin was supposed to be at the presser without the row of fellow governors who stood silently behind her.

Another RGA source tells me the reason for that is a "long story" that i'll be told later.

Haley Barbour told Evan Glass that they all met at 9a and by then it was "decided" that they'd all go out.

But , notice that the host, Florida's Charlie Crist, wasn't even there.
A Florida GOP source said "he didn't know about it"

Also, it was slated for 20 minutes or so, but as you all saw, she took 4 questions...and the last, mine, was only because Gov Perry forced it.

If you couldn't sense the awkward tension on TV, you could definitely feel it in the room....