• THE DEMOCRATIC SENATE LEADERSHIP IS CONSIDERING A NEW ROLE FOR SEN. HILLARY CLINTON (D-NY) SHOULD SHE DECIDE TO REMAIN IN THE SENATE AND NOT ACCEPT THE RUMORED OFFER OF A POSITION IN PRESIDENT-ELECT OBAMA’S CAMBINET. SEN. TED KENNEDY (D-MA) SAID THAT CLINTON WOULD HEAD A WORKING GROUP ON HEALTH CARE REFORM.

• CNN IS REPORTING THAT PRESIDENT-ELECT OBAMA’S TOP CHOICE FOR SECRETARY OF HOMELAND SECURITY IS ARIZONA GOV. JANET NAPOLITANO. OBAMA HAS ALSO CHOSEN FORMER SEN. TOM DASCHLE TO BE SECRETARY OF HEALTH AND HUMAN SERVICES. DASCHLE WOULD ALSO SERVE AS “HEALTH CZAR.”

• SOME LAWMAKERS LASHED OUT AT THE CEO’S OF THE BIG THREE AUTO COMPANIES YESTERDAY FOR FLYING PRIVATE JETS TO D.C. TO REQUEST TAXPAYER BAILOUT MONEY. THE EXECS WERE SEEKING SUPPORT FOR A $25 BILLION LOAN PACKAGE. LATER YESTERDAY, SEN. HARRY REID REVERSED PLANS TO HOLD A TEST VOTE ON THE MEASURE.

• A SECURITY PACT BETWEEN THE U.S. AND IRAQI GOVTS WILL ALLOW U.S. TROOPS TO FINISH THE WORK IT NEEDS TO DO BEFORE LEAVING THE COUNTRY IN 2011, A PENTAGON SPOKESMAN SAID YESTERDAY. THE SPOKESMAN SAID THE AGREEMENT GIVES THE TROOPS THE AUTHORITY AND TIME THEY NEED TO CONDUCT OPERATIONS AND TRAIN IRAQI FORCES TO A SUFFICIENT LEVEL.

• CALIFORNIA’S SUPREME COURT SAID YESTERDAY THAT IT WILL HEAR THE APPEAL OF A CHALLENGE TO PROPOSITION 8, WHICH OUTLAWED GAY MARRIAGE. THE COURT SAID IT WILL NOT BLOCK THE IMPLEMENTATION OR ENFORCEMENT OF THE LAW IN THE MEANTIME.

• REP. MAXINE WATERS (D-CA) CALLS IN AT 6:30AM PACIFIC TO TALK ABOUT HER ANGER AT TREASURY SECRETARY HENRY PAULSON FOR CHANGING THE TERMS OF THE BAILOUT.

• CNN’S CHIEF BUSINESS CORRESPONDENT ALI VELSHI CALLS IN AT 7:06AM PACIFIC TO DISCUSS THE POSSIBILITY AND RAMIFICATIONS OF AN AUTO INDUSTRY BAILOUT.

• FORMER CLINTON DEPUTY ATTORNEY GENERAL ERIC HOLDER IS PRESIDENT-ELECT OBAMA’S CHOICE FOR ATTORNEY GENERAL, ACCORDING TO TWO PROMINENT DEMS INVOLVED IN TRANSITION MATTERS. IF CONFIRMED, HOLDER WOULD BE THE 1ST AFRICAN-AMERICAN TO LEAD THE JUSTICE DEPARTMENT.

• THE SENATE DEM CAUCUS VOTED 42-13 YESTERDAY TO LET SEN. JOE LIEBERMAN (I-CT) CONTINUE CHAIRING THE SENATE HOMELAND SECURITY COMMITTEE. THE CAUCUS DID, HOWEVER, STRIP LIEBERMAN OF HIS SPOT ON THE ENVIRONMENT AND PUBLIC WORKS COMMITTEE.

• THE LONGEST-SERVING GOP-ER IN THE U.S. SENATE, ALASKA SEN. TED STEVENS, LOST HIS RE-ELECTION EFFORT TO ANCHORAGE MAYOR MARK BEGICH, BRINGING THE DEM NET GAIN IN THE U.S. SENATE TO 7 SEATS.

• DETROIT’S BIG THREE AUTOMAKERS PLEADED WITH CONGRESS YESTERDAY FOR A $25 BILLION LIFELINE TO SAVE THEIR COMPANIES FROM COLLAPSE, WARNING OF BROADER PERIL FOR THE NATIONAL ECONOMY AS WELL.

• MEMBERS OF THE HOUSE FINANCIAL SERVICES COMMITTEE, EXASPERATED BY SHIFTS IN BAILOUT STRATEGY, GRILLED TREASURY SECRETARY HENRY PAULSON YESTERDAY FOR NOT DOING ENOUGH TO HELP DISTRESSED HOMEOWNERS.

• DETROIT’S BIG THREE AUTO MAKERS ARE BEGGING CONGRESS FOR A $25 BILLION GOVERNMENT RESCUE, WHILE THE LEGISLATION CLINGS TO LIFE SUPPORT ON CAPITOL HILL AND TOP LAWMAKERS AND THE WHITE HOUSE SUFFER FROM BAILOUT FATIGUE.

• FORMER PRESIDENT CLINTON’S INTERNATIONAL BUSINESS DEALINGS, GLOBAL FOUNDATION, AND PENCHANT FOR GOING OFF SCRIPT COULD PRESENT A SIGNIFICANT OBSTACLE TO HILLARY CLINTON BECOMING SECRETARY OF STATE. HIS COMPLICATED GLOBAL BUSINESS INTERESTS COULD PRESENT FUTURE CONFLICTS OF INTEREST THAT RESULT IN UNNEEDED HEADACHES FOR PRESIDENT-ELECT OBAMA.

• PRESIDENT-ELECT OBAMA AND SEN. JOHN MCCAIN (R-AZ) SAID YESTERDAY THAT AMERICANS ARE LOOKING FOR LEADERS WHO WILL COME TOGETHER AND “CHANGE THE BAD HABITS OF D.C.” THE FORMER RIVALS SAID AFTER YESTERDAY’S MEETING THAT “AMERICANS OF ALL PARTIES WANT AND NEED THEIR LEADERS… TO SOLVE THE COMMON AND URGENT CHALLENGES OF OUR TIME.”

• SENATE DEMS APPEAR WILLING TO LET SEN. JOE LIEBERMAN (I-CT) KEEP HIS POWERFUL HOMELAND SECURITY COMMITTEE CHAIRMANSHIP. HE WILL, HOWEVER, LOSE A LESS PROMINENT CHAIRMANSHIP OF A SUBCOMMITTEE ON THE ENVIRONMENT AND PUBLIC WORKS COMMITTEE.

• SEN. TED KENNEDY (D-MA) RETURNED TO CAPITOL HILL YESTERDAY AFTER A BATTLE WITH BRAIN CANCER THAT HOSPITALIZED HIM IN MAY. HE APPEARED EAGER TO GET BACK TO WORK. “I FEEL FINE… LOOKING FORWARD PARTICULARLY TO WORKING WITH BARACK OBAMA ON HEALTH CARE,” HE SAID.

• PRESIDENT-ELECT BARACK OBAMA WILL MEET WITH FORMER GOP PRESIDENTIAL CANDIDATE JOHN MCCAIN TODAY IN CHICAGO. THE MEETING WILL TAKE PLACE AT THE OBAMA TRANSITION HEADQUARTERS. OBAMA AND MCCAIN WILL BE JOINED IN THE MEETING BY SEN. LINDSEY GRAHAM (R-SC) AND OBAMA’S NEW CHIEF OF STAFF, RAHM EMANUEL.

• THE OBAMA TRANSITION OFFICE ANNOUNCED YESTERDAY THAT PETER ROUSE, OBAMA’S CHIEF OF STAFF IN HIS SENATE OFFICE, WILL SERVE AS SENIOR ADVISER TO THE PRESIDENT. BEFORE JOINING OBAMA IN 2004, ROUSE WAS CHIEF OF STAFF FOR 19 YEARS TO FORMER SENATE DEM LEADER TOM DASCHLE OF SOUTH DAKOTA. BEFORE THAT, HE WAS CHIEF OF STAFF TO THEN-REP. DICK DURBIN OF ILLINOIS.

• OBAMA SAID YESTERDAY THAT STIMULATING THE ECONOMY IS A TOP PRIORITY - EVEN IF IT MEANS ADDING TO THE NATION’S GROWING DEFICIT. HE SAID HIS FIRST LEGISLATIVE GOAL IS TO PASS AN ECONOMIC STIMULUS PACKAGE. HE ADDED THAT THE POTENTIAL COLLAPSE OF THE AUTO INDUSTRY WOULD BE “A DISASTER” AMID TODAY’S ECONOMIC CRISIS.

• THE IRAQI CABINET YESTERDAY APPROVED A SECURITY PACT THAT WOULD SET THE TERMS FOR U.S. TROOPS IN IRAQ. THE AGREEMENT SETS 6/30/09 AS THE DEADLINE FOR U.S. TROOPS TO WITHDRAW FROM ALL IRAQI CITIES AND TOWNS. THE DATE FOR ALL TROOPS TO LEAVE IRAQ WILL BE DECEMBER 31, 2011.

• CALIFORNIA’S FIRE AGENCY SAYS THAT THE MAJOR FIRE NEAR SANTA BARBARA THAT DESTROYED 210 HOMES APPEARS TO BE HUMAN-CAUSED. TWO OTHER FIRES IN LOS ANGELES, ORANGE, AND RIVERSIDE COUNTIES HAVE DESTROYED HUNDREDS OF HOMES AND FORCED MORE THAN 10,000 PEOPLE TO FLEE THEIR HOMES.

• CAROLE FLORMAN, COMMUNICATIONS DIRECTOR FOR THE JOINT CONGRESSIONAL COMMITTEE FOR INAUGURAL CEREMONIES, CALLS IN AT 7:30AM PACIFIC TO TALK ABOUT THE INAUGURATION.

• FRANGELA JOINS US IN STUDIO FOR “FRIDAYS WITH FRANGELA!!!”

• THE OBAMA TRANSISTION TEAM IS, ACCORDING TO SOURCES, “VERY SERIOUS” ABOUT SEN. HILLARY CLINTON (D-NY) BEING UNDER CONSIDERATION FOR SECRETARY OF STATE. CLINTON WAS SPOTTED BOARDING A FLIGHT TO CHICAGO AND CNN IS REPORTING THAT AN ANNOUNCEMENT COULD COME AS EARLY AS TODAY.

• PRESIDENT-ELECT OBAMA SUBMITTED HIS LETTER OF RESIGNATION FROM THE U.S. SENATE YESTERDAY, EFFECTIVE SUNDAY. THE MOVE PUTS PRESSURE ON ILLINOIS’ GOVERNOR TO FIND A REPLACEMENT FOR OBAMA TO SERVE UNTIL 2010.

• SEN. CHRIS DODD (D-CT), AN ARCHITECT OF THE ORIGINAL BAILOUT BILL, SAYS THAT DEMS LACK THE VOTES TO PASS A BILL GIVING AUTO COMPANIES A PIECE OF THE $700 BILLION BAILOUT PIE NEXT WEEK. EVEN AFTER JANUARY, DEMS MAY EVEN HAVE TROUBLE GETTING NECESSARY GOP SUPPORT IN THE SENATE TO PASS A NEW RESCUE PLAN FOR AUTOMAKERS.

• A HUGE WILDFIRE FANNED BY STRONG WINDS HAS DESTROYED AT LEAST 70 MULTIMILLION-DOLLAR HOMES IN THE CELEBRITY ENCLAVE OF MONTECITO, NORTHWEST OF LOS ANGELES. HOMEOWNERS IN THE AREA INCLUDE JOHN CLEESE, CHRISTOPHER LLOYD AND ROB LOWE, AS WELL AS OPRAH WINFREY, WHO HELD A FUNDRAISER FOR BARACK OBAMA AT HER MONTECITO ESTATE EARLIER THIS YEAR.