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The news that House Majority Leader Tom DeLay had been dreading for months was brought by an aide, who interrupted DeLay's weekly lunch with Dennis Hastert in the House Speaker's office. DeLay absorbed it, and then the man widely called the Hammer on Capitol Hill (though rarely to his face) did what he does best: he hit back. All right, DeLay replied. Let's go. Let's go fight. Less than three hours later, before a roomful of reporters, DeLay addressed a Texas grand jury's charge that he and two political associates conspired to funnel $155,000 in illegal corporate campaign contributions into Texas legislative races. He called it one of the weakest, most baseless indictments in American history and the prosecutor who brought the case a partisan fanatic. That night, anxious to show he's not a recluse, he introduced Rudy Giuliani at a Friends of Israel banquet. DeLay even made an uncharacteristic round of the cable shows, hinting darkly on cnn that he would soon produce very good evidence that his nemesis, Travis County district attorney Ronnie Earle, had engaged in a conspiracy of his own--with the Democratic leadership here in Washington.

Combativeness has seen Tom DeLay through near-death experiences before, but on the Hill late last week, it was hard to miss the signs that his foot soldiers and allies had begun positioning themselves in anticipation of his demise. G.O.P. rules require that DeLay, 58, majority leader since 2003, relinquish his post while he fights the conspiracy charge, and speculation is rife that even if he is acquitted his days as one of the most powerful men in the House could be over. You leave a job like this, there is no coming back, says a top Republican official who likes DeLay and thinks he will be cleared. Politics abhors a vacuum more than anything else, and it's going to move past him too quickly.

Almost immediately, it did. A plan engineered by DeLay and Hastert to install complaisant Rules Committee chairman David Dreier as temporary majority leader was nixed by conservatives who dislike Dreier's moderate positions on stem-cell research and gay marriage. Instead the brain trust installed ambitious whip Roy Blunt, who will share some of the majority leader's duties with Dreier. The setup is so shaky that some House Republicans are pressing for the election of a new leadership team as early as January.

Meanwhile, lobbying shops that had traded on the access to DeLay were desperately dialing House aides to forge new relationships. Those not tied to DeLay were calling the same staff members to gloat. There's millions of dollars on the table, said an aide who had heard from both camps. These guys are going to slaughter each other. What's left of the G.O.P. leadership, already beset by a raft of other political problems, was trying to figure out how to salvage the ambitious legislative agenda of more tax cuts, hurricane help and gas-price relief that they want to carry them to next year's midterm elections--a more difficult challenge with the sidelining of the man who had so determinedly pulled off many of their close victories.

DeLay may not have seen the worst of it yet. Sources tell TIME that while Earle was closing in on DeLay from Austin, Texas, a federal investigation into the spreading scandal around disgraced lobbyist Jack Abramoff, accused with Michael Scanlon (a former press secretary of DeLay's) of bilking their Indian-tribe clients out of $66 million, has begun lapping at the edges of the former majority leader's operation. A former Abramoff associate who was questioned by the FBI in August says, They had a lot of e-mails, a lot of traffic between our office and DeLay's office. Many of those exchanges involved lavish travel by DeLay arranged by the lobbyist but requested, the e-mails suggest, by aides in DeLay's office. (House members are allowed to accept gifts under limited circumstances but not to solicit them.) Says the source: There was nothing I saw that hit DeLay personally, but there was a lot of questionable stuff that was going on with his staff. 'Tom wants this. Tom wants that.' Was it really him or just the staff that was being aggressive? DeLay's office wouldn't comment on the Justice Department investigation, and neither would the FBI.

Republicans had plenty of problems even before the latest blow to DeLay. Voters are angry about gas prices, the war in Iraq and the botched response to Hurricane Katrina. Polls show President George W. Bush at or near the lowest public-approval ratings of his presidency. On the other side of the Capitol, Senate majority leader Bill Frist faces an investigation by the Securities and Exchange Commission into the circumstances surrounding his decision to sell all of his stock in the hospital chain founded by his family, Hospital Corporation of America, in June, just before the share price dropped following a bad earnings report.

So dispirited are Republicans that some worry about losing control of the House--a danger that once seemed remote. We're looking in the crystal ball. We're moving into an area where we don't know what will happen, says deputy whip Tom Cole, a conservative from Oklahoma. With a switch of only 15 seats required to end their majority, Cole is anxious that the party may have to contest as many as 100 tight races if the winds arraying against it turn into a national backlash like the one that ended the Democrats' 40-year reign in 1994. Having seen how the Democrats failed to galvanize their voters in that campaign, Republicans say the chief goal in rewriting their strategy for the fall will be to re-energize their base. The plan taking shape calls for a robust conservative agenda through next spring, including a tax-reform package. That move would allow Republicans to pivot back to issues like education tax credits that would appeal more to moderates as the elections approach.

As for DeLay, his struggles appear likely to consume him for many months. He has launched what amounts to a major political campaign to convince supporters that the indictment is flimsy and he is a victim of a political smear. DeLay pointed to Democrats' vow to use G.O.P. ethics as a campaign issue, and supporters noted criticism of Earle in Texas for speaking in May to a $100,000 fund raiser for a Democratic political action committee (PAC). But DeLay has produced no evidence Earle conspired with Democrats in Washington.

While it's true that Earle and DeLay have been locked in a complicated war of Texas-size egos for years, the charges against DeLay are fairly simple. During the 2002 elections, a committee DeLay founded to support conservative politicians--Texans for a Republican Majority, or TRMPAC--allegedly accepted $155,000 in corporate donations and then included that in a check for $190,000 to the Republican National Committee, which then routed a similar amount to seven Texas legislative candidates. DeLay's lawyers say the transactions were separate and that the PAC accepted money from both individuals and corporations. The contribution helped produce six wins that were crucial to DeLay's political ambitions in Washington because they resulted in a Republican majority in the state legislature, which redrew congressional district lines and helped add five more Republicans to the state's congressional delegation. If convicted, DeLay faces up to two years in prison and a maximum fine of $100,000.

DeLay has done his best to paint the D.A. as a Democratic loose cannon. But Earle, 63, points out that of the 15 public officials he has prosecuted, 12 have been fellow Democrats. Texas law makes it a felony for corporations and labor unions to contribute money to political campaigns, Earle tells TIME. My job is to prosecute felonies. I'm doing my job. The grand jury foreman, William Gibson, 76, insists that this was not one of those rubber-stamp deals. Ronnie Earle did not indict Mr. DeLay. Twelve people on that grand jury voted to indict.

If DeLay has cause for hope, it may be that Earle has been more successful convicting minor figures than major ones. The majority leader has put together a legal team headed by Dick DeGuerin, who handed Earle the most spectacular failure of his career: a 1994 misconduct case against former state treasurer Kay Bailey Hutchison that Earle was forced to drop on the first day of trial. Hutchison is now the state's senior Senator.

There are those who predict that DeLay will be able to balance mounting a defense with pulling strings behind the scenes in the House. But whereas he had been accustomed to just stepping downstairs to the majority leader's spacious suite of Capitol offices after a House vote, dusk last Thursday afternoon found DeLay outside on the Capitol Plaza, waiting at a traffic light to return to his office in the Cannon House Office Building across the street. Just like any other Congressman.