Democratic David Copperfields

Poof! It disappeared without a trace. Then a wave of a wand. It reappeared in their opponents’ hand. This week the Democrats lost — no, gave away — the single largest domestic political issue of this year, the mortgage and housing crisis.

Senators returned from their two-week break, where they heard an earful about the economic situation. They also saw the Fed bail out Bear Stearns. Now they were ready to deal on the housing bill the Senate had stifled just a few weeks before. Democrats were in the driver’s seat.

What unfolded next was stunning. The bill began taking the shape of Republican legislation as Georgia’s Sen. Johnny Isakson got a significant tax credit added. Republican Leader Mitch McConnell (Ky.) and Democratic Leader Harry Reid (Nev.) appeared at a press conference shoulder-to-shoulder to announce they had worked out a way for the bill to proceed. The Republicans garnered headlines of bipartisan cooperation.

Then the missteps by the Democratic leadership really kicked in. Or maybe the credit should go to my old boss, Sen. McConnell, who simply outmaneuvered them and is just plain smarter.

So what in the world happened in the Senate this week?

Let’s recap:

* The Democrats began the week by giving McConnell veto authority over anything in the text of the compromise bill they were to consider on the housing bill.

* The Democrats lost control of the floor as the Republicans were able to dictate whether each amendment would require 50 or 60 votes to pass (It’s a procedural discussion but too long to get into here).

* They lost control of their tried and true allies on the left — including labor, the Center for American Progress and ACORN — as they ripped the bill as inadequate or even counterproductive from their point of view.

* Harry Reid lost control of his temper on the Senate floor and in a fit of pique even told the truth. “I don’t know what’s going on here,” he said.

* Then the kicker. Dick Durbin (Ill.), the Senate Democrats’ No. 2 leader, lost his own amendment. (Through procedural maneuvering, he was actually forced to offer to kill his own amendment.) This provision originally was the key to the Democrats’ housing package. Durbin’s amendment dealing with bankruptcy was the single provision that would actually help homeowners who face foreclosure.

Republicans took action. They took the headlines. They took the issue.

Majority Leader Clinton, anyone?