The Senate approved START today. It’s a big deal for U.S.-Russian relations and sends a clear message to Moscow: Work with us, not against us. The president killed the Don’t Ask, Don’t Tell policy. It was a priority for Obama who promised on the campaign trail to end the ban on gays openly serving in the military. Democrats caved on taxes and approved Obama’s compromise with Republicans — giving the president a chance to take credit, whether it was an optical win or something more substantial notwithstanding.

Now, some of my colleagues in the media biz think all of this adds up to a Comeback Kid moment for Obama. They see this as a great showing for a man who had the cards stacked against him after Democrats’ November drubbing. It’s not a completely off-base analysis, but it is a bit too dramatic for Extra.

Instead, we’ll just go with what the president himself had to say: “If there’s any lesson to draw from these past few weeks, it’s that we are not doomed to endless gridlock. We’ve shown in the wake of the November elections that we have the capacity not only to make progress, but to make progress together.”

With that, Reuters Washington Extra will close out 2010. Merry Christmas to those of you who celebrate it. Happy long weekend to those of you who do not. And Happy New Year to us all. Talk with you again in 2011.

Here are our top stories from Washington today…

U.S. challenges China wind power aid at WTO

The United States on Wednesday accused China of illegally subsidizing the production of wind power equipment and asked for talks at the World Trade Organization, the first step in filing a trade case. USTR estimated Chinese manufacturers of wind turbines and related parts and components could have received several hundred million dollars in questionable government grants in 2008 under China’s “Special Fund for Wind Power Manufacturing.”

For more of this story by Doug Palmer, read here.

U.S. military to allow gays, but rules will take time

President Barack Obama on Wednesday signed a landmark law to allow gays and lesbians to serve openly in the U.S. military for the first time, but it could be many months before a move some top officers warn may endanger troops will finally take effect.  The Pentagon is drafting new rules following the repeal of the “Don’t Ask, Don’t Tell” policy, which Congress passed this month, to cheers from opponents of a long-standing policy that forced gay service members to hide their sexuality.

For more of this story by Missy Ryan, read here.

U.S. Senate ratifies nuclear arms treaty with Russia

The U.S. Senate approved a landmark nuclear arms control treaty with Russia on Wednesday, handing President Barack Obama a major foreign policy victory in his drive to improve ties with Moscow and curb the spread of atomic weapons to other nations.  The Senate voted 71-26 in favor of the treaty after a contentious debate with Republican leaders that threatened traditional bipartisanship on national security affairs.

For more of this story by David Alexander and Thomas Ferraro, read here.

Republican calls for pause on Dodd-Frank rules

Implementation of the new U.S. financial reform law should be delayed for a year so regulators have more time to understand the impact of rules they are writing, a key House Republican said in an interview with Reuters.  Representative Randy Neugebauer of Texas, who will head the House of Representatives Financial Services oversight subcommittee next year, said the “pause” would allow regulators to study whether a rule required by the law would do more harm than good.

For more of this story by Dave Clarke, read here.

What we are blogging…

CIA on WikiLeaks — WTF
The CIA gets the prize for the most entertaining acronym in Washington, a city that cannot speak without using at least one in every sentence. The CIA (Central Intelligence Agency) has formed the WikiLeaks Task Force which is being referred to in-house as WTF.
For Toby Zakaria’s full post, click here.

From elsewhere…

Traffic tip for Santa: reflective reindeer collars
Norwegian reindeer owners have a Christmas safety tip for Santa — put reflectors on his fleet-footed animals so they won’t get hit by cars. About 2,000 reindeer have been fitted this month with reflective yellow collars or small antler tags to cut down on the car crashes that now kill 500 reindeer a year and pose a danger to motorists across Arctic Norway.

For the full story, click here.

For more stories from our Washington correspondents visit www.reuters.com and stay informed.

Photo Credit: REUTERS/Jim Young (Obama arrives at Interior Department to sign Don’t Ask, Don’t Tell Repeal)

But it’s hard for Extra to call this a good day for Dems. Republicans have promised to unravel everything from Tuesday’s net neutrality decision at the FCC to Dodd-Frank and Obamacare. They’ve pushed the fight over government spending into 2011, when they’ll run the House and have more leverage in the Senate. That means regulators won’t get the extra funds they’ve requested to tighten oversight of Wall Street, as Mary Schapiro lamented to Reuters today.

Lest you think Extra’s too short-sighted, too focused on 2011, consider what could be the most politically significant news of the day — new Census data. Democrats cannot be anything but bummed by the Census showing a population shift from blue states to red ones. It means a redrawing of congressional districts that will likely add Republicans to the House. We won’t bog you down with the details, but just remember it’s the number of House seats that determines a state’s representation in the Electoral College

and it’s the Electoral College that picks the president.

Here are our top stories from Washington today…

Republican-leaning states gain clout from Census

Republican-leaning states in the South and West will gain political clout from new population figures, dealing a blow to President Obama and Democrats that could linger for years. The Census estimates show a population shift from Democratic-leaning states in the Northeast and Midwest to Republican strongholds like Texas, Utah and South Carolina, giving those states more seats in the House of Representatives. The release of the figures kicks off the once-a-decade, state-by-state fight over redrawing congressional lines to ensure each House district represents roughly the same number of people.

For more of this story by John Whitesides, read here.

For a factbox on states that gained clout, click here.

Divided U.S. FCC adopts Internet traffic rules

Communications regulators adopted Internet traffic rules that prevent providers from blocking lawful content but still let them ration access to their networks. The FCC approved the “Open Internet” order after Chairman Julius Genachowski’s plan got the support of fellow Democrats Michael Copps and Mignon Clyburn. The rules aim to strike a balance between the interests of Internet service providers, content companies and consumers, but some industry analysts think a court challenge is still likely.

For more of this story by Jasmin Melvin, read here.

For a graphic of the top online video providers, click here. For a graphic of smartphone market share, click here.

Senate postpones spending fight

The Senate has approved a compromise bill to fund the government for several months as Congress moved to postpone a struggle over spending and the deficit until next year. The bill to fund the government through March 4 would give Republicans the chance to try to push dramatic budget cuts when they take control of the House of Representatives early next year. The bill would deny Obama the budget increases he has sought to implement his signature reforms of healthcare and financial regulations.

For more of this story by Andy Sullivan, read here.

Inside AIG’s tortuous turnaround

AIG has come a long way, rebounding far faster and more dramatically than nearly anyone inside or outside the company expected. As a result, the Treasury Department, which will own more than 90 percent of the company, is likely to hold two large stock sales next year and aims to offload the rest in 2012. A big profit from the AIG rescue and the government’s disentanglement would be a boost for the Obama administration. But the remarkable reversal of fortune has taken a tortuous path, and the way ahead is not without risks.

For more of this special report by Paritosh Bansal, Kristina Cooke and David Lawder, read here.

For a graphic of profit scenarios for Treasury’s stake in AIG, click here.

For a newsmaker story on Treasury’s ‘AIG fix-it man,’ Jim Millstein, click here.

Lack of funds will restrict SEC plans: Schapiro

Budget shortfalls will hurt the SEC even as it desperately needs funds to bolster equity markets and adopt new rules required by the Dodd-Frank financial overhaul, its chairman said. Congress is set to reject the Obama administration’s plan to boost funding for the SEC and CFTC by millions of dollars. “We will have to take some more steps to cut back,” SEC Chairman Mary Schapiro said in an interview. “At this stage it will impact our work.”

For more of this story by Rachelle Younglai, read here.

START appears to have support for US Senate passage

President Obama’s strategic nuclear arms treaty with Russia appears to have enough Republican support to win passage in the Senate when it comes to a final vote expected this week. At least 10 Senate Republicans have said they back the accord — which should be enough to give Democrats the needed two-thirds majority. All 58 members of the Senate Democratic caucus are expected to support the treaty.

For more of this story by David Alexander and Thomas Ferraro, read here.

CFTC fines, bans natgas traders for fraud scheme

The U.S. futures regulator said it has fined two natural gas traders for a fraudulent trade allocation scheme and permanently banned them from trading.

For more of this story, read here.

Go ‘long on women’ for profits, BofA Merrill says

Recession wounds are healing faster for women than for men, so there is money to be made for companies that cater to women, economists at Bank of America-Merrill Lynch said.

For more of this story, read here.

What we are blogging…

This lame duck sure can fly

Congress seems to work better under deadline pressure (like journalists). Democrats are racing to cram as much through the post-election lame duck session as possible, before their majority turns into a pumpkin when Republicans take control of the House of Representatives in January. The lame duck session of Congress has produced — tax cut extensions have been signed into law, the repeal of “Don’t Ask , Don’t Tell” to allow gays to serve openly in the military will be signed into law tomorrow, and the START treaty is moving toward ratification.

For Tabassum Zakaria’s full post, read here.

For more stories from our Washington correspondents visit www.reuters.com and stay informed.

Photo Credit: REUTERS/Hyungwon Kang (U.S. Capitol Dome after the first significant snowfall of the season)

It is not just President Barack Obama and the Democrats who support this treaty. Former President George H.W. Bush, a Republican, supports it. So does Republican Condoleezza Rice and every other former secretary of state who is still alive. And the military? Well those folks really support it, just ask the chairman of the Joint Chiefs of Staff and the uniformed officers in charge of nuclear security.

So what’s the problem?

“The American people don’t want us to squeeze our most important work into the final days of a session,” Senate Republican leader Mitch McConnell argued. Republicans, it seems, think Obama and the Democrats just want to notch one last victory before Republicans take the House in January.

Russia’s foreign minister warned U.S. senators not to make changes to the treaty during debate because it might not just delay the deal, it could kill it altogether. Not exactly the Christmas present Obama was hoping for in 2010.

Here are our top stories from Washington today…

Arms treaty debate increasingly testy in Senate

Debate in the Senate over President Obama’s strategic nuclear arms treaty with Russia grew increasingly testy, but the White House expressed confidence lawmakers would approve the accord before their break. Republican senators pushed for a series of amendments in an effort to kill the New START treaty by forcing a renegotiation. Russian Foreign Minister Sergei Lavrov has warned that any amendment would be a deal-breaker.

For more of this story by David Alexander, read here.

For a Q+A by David Alexander on START’s ‘moment of truth’, click here.

Obama working hard on START to secure year-end win

Eager to notch another year-end political victory, President Obama has worked to ease Republican doubts over a nuclear arms treaty with Russia. Success would cap a productive period in the closing weeks of this Congress.

For more of this story by Alister Bull and Steve Holland, read here.

Wall Street to regulators: No need to rush

As regulators race to write rules that will put Wall Street reform legislation into action, industry groups are trying to apply the brakes. The new law requires regulators to potentially write hundreds of rules, many under a tight time-frame. But in cases where the Dodd-Frank law leaves a bit of wiggle room on deadlines, industry groups are urging regulators to take a deep breath and adopt a go-slow approach.

For more of this analysis by Ann Saphir and Dave Clarke, read here.

Hedge funds may skirt direct Fed scrutiny -source

The Federal Reserve does not believe any one hedge fund can topple the financial system and therefore the private pools of capital may escape direct supervision by the central bank, an industry source familiar with the Fed’s position said.

For more of this story by Rachelle Younglai and Dave Clarke, read here.

For some professors, disclosure is academic

A growing number of critics are arguing that disclosing industry relationships should be mandatory for academics who appear before congressional policy hearings as independent experts. After all, these critics say, congressional testimony is a key step in the legislative process and can have enormous sway on policy. “If someone is presented as a disinterested expert, but they actually have a financial relationship with someone with an interest in what they are talking about, that leaves the members of the public in the dark and sometimes members of the committee as well,” said Bill Allison of the Sunlight Foundation.

For more of this special report by Emily Flitter, Kristina Cooke and Pedro da Costa, read here.

In Afghan war, US finds fighting may be easy part

While the White House review of the Afghan war last week reported a surge in troops has pushed Taliban militants out of some key areas, it also underscored that fighting may be the easy part in Afghanistan. The review, despite a cautiously optimistic tone, recognized that much remains to be done to improve Afghan governance and persuade Pakistan to end militant safe-havens as President Obama aims to start bringing troops home next year.

For more of this analysis by Missy Ryan, read here.

Automakers sue EPA over higher ethanol blends

Automakers and engine makers sued the EPA on Monday for allowing higher blends of ethanol for newer cars, which they think could confuse consumers at fuel pumps and lead to damage of engines in older vehicles.

For more of this story by Timothy Gardner, read here.

What we are blogging…

Senator Coburn’s waste line — $11.5 billion in 2010 spending

Republican Senator Tom Coburn has released his “Wastebook 2010″ report, a list of government spending that adds up to over $11.5 billion that he considers wasteful. It includes burping cows, Vidalia onions, a 2,500-year-old mummy, and finding love on the Internet. “Even those lucky enough to have jobs have had to tighten their belts. Yet, Congress continues to find new and extravagant ways to waste tax dollars,” Coburn said in a statement.

For Tabassum Zakaria’s full post, read here.

For more stories from our Washington correspondents visit www.reuters.com and stay informed.

Photo Credits: REUTERS//Kevin Lamarque (McConnell (L) makes his way into the Old Senate Chamber for a closed session about the new START treaty); REUTERS/Jason Reed (Obama  and Russian President Dmitry Medvedev exchange documents after signing  START II  in April.