Smith blames himself personally and believes that he is politically unnecessary - he wants to leave the capital city if all he can do is discredit his country's respected institutions. He wavers with disillusionment, feeling that he is only "decorating a chair" and acting like a "Christmas tiger." At Senator Paine's home, Smith's feelings are soothed. Paine argues that he needn't know the contents of the Senate's bills - the product of "legal minds after long study" - he will be advised on how to vote when the time comes. To placate Smith and keep him from resigning, Paine deflects his attention and convinces him to stay on and learn how the Senate works by writing, introducing, and supporting his own pet project - a bill to create a national boys' camp, one of his long-standing dreams.

The camera presents close-ups of the angular, gangling Smith nervously dithering with his hat and repeatedly dropping it when Susan Paine enters the room and engages him in conversation. On his way out, he knocks over furniture and a lamp, becoming a total "conquest" of hers:

Paine: At the expense of some of the furniture Susan, you've made another conquest.
Susan: Not ol' Honest Abe.
Paine: And with Honest Abe's ideals. A rare man these days, Susan.

With renewed enthusiasm, Senator Smith begins to draft a boys camp Senate bill, with Saunders' reluctant but feisty expertise and assistance. As his slightly contemptuous and knowledgeable mentor, she provides an elementary civics lesson, educating him about the long journey a bill must take for passage:

Saunders: Do you mind if I give you a rough idea of what you're up against?
Smith: No. Nope. Go ahead.
Saunders: Well, Senator has a bill in mind, like your camp...Now, what does he do? He has to sit down first and write it up - the why, when, where, how, and everything else. Now that takes time.
Smith: But this one is so simple.
Saunders: Oh I see, this one's simple.
Smith: Yeah, and with your help...
Saunders: Oh, I'm helping, yeah. Simple and I'm helping, so we knock it off in record-breaking time of, let's say, three or four days.
Smith: Oh, a-a day.
Saunders (incredulous): A day?
Smith: Yes, just tonight.
Saunders: Tonight. I don't seem to be complaining Senator, but in all civilized countries, there's an institution called dinner.

After eating dinner on trays like big executive-types and working all night on the bill, morning dawns and the bill must be introduced in the Senate:

Saunders: You get to your feet in the Senate, take a long breath, and start spouting, but not too loud because a couple of the Senators might want to sleep. Then a curly-headed page boy takes it up to the desk where a long-faced clerk reads it, refers it to the right committee...
Smith: ...Why?
Saunders: Look, committees are small groups of Senators have to sit the bill down, look into it, study it and report to the whole Senate. You can't take a bill nobody ever heard about and discuss it among ninety-six men. Where would you get?...Now days are going by, Senator. Days, weeks! Finally, they think it's quite a bill. It goes over to the House of Representatives for debate and a vote. But it has to wait it's turn on the calendar...That's the order of business. Your bill has to stand way back there in line unless the steering committee thinks it's important.
Smith: What's that?
Saunders: ...Do you really think we're getting anywhere?
Smith: Oh yes Miss Saunders. Now tell me, what's the steering committee?
Saunders: A committee of the majority party leaders. They decide when a bill is important enough to be moved up toward the head of the list.
Smith: Well, this is!
Saunders: ...Where are we now?...Oh yeah, House. More amendments, more changes and the bill goes back to the Senate. If the Senate doesn't like what the House did to the bill, they make more changes. If the House doesn't like those changes, stymied.
Smith: So?
Saunders: So they appoint men from each House to go into a huddle called a conference and they battle it out. Finally, if your bill is still alive after all this vivisection, it comes to a vote. Yes sir, the big day finally arrives (pause) and Congress adjourns. (The smile on Smith's face droops.) Catching on, Senator?
Smith: Uh huh. Shall we start on it right away or order dinner first?

After deflating his patriotic zeal a bit with the realities of political systems and processes, they begin the tireless work of drafting the bill late that night in the Senate Office Building.

In one of the crucial dramatic scenes of the film, they begin to formulate their ideas. Smith is inarticulate and stutters incoherently as he tries to inject patriotic ideals into the words of the bill. He gestures out the window at the floodlit Capitol Dome while describing the spirit that the bill must incorporate:

Smith: Did you ever have so much to say about something, you just couldn't say it?
Saunders: Try sitting down.
Smith: I did - I got right back up again.
Saunders: Now look. Let's get down to particulars. How big is this thing? Where's it gonna be? How many boys will it accommodate? You've got to have all of that in it, you know.
Smith: Yeah, yeah, and something else, Miss Saunders. The uh, the spirit of it. The idea - the - (He snaps his fingers) How do ya say it? (He walks to the window in which the lighted Capitol Dome is seen) (He points out at the Dome) That's what's got to be in it!
Saunders: What?
Smith: The Capitol Dome.
Saunders (quietly sarcastic): On paper? (She lifts her eyebrows a little)
Smith: I want to make that come to life for every boy in this land. Yes, and all lighted up like that too! You see, you see, boys forget what their country means by just reading 'the land of the free' in history books. And they get to be men - they forget even more. Liberty's too precious a thing to be buried in books, Miss Saunders. Men should hold it up in front of them every single day of their lives and say: 'I'm free to think and to speak. My ancestors couldn't. I can. And my children will.' Boys want to grow up remembering that. (Saunders looks at Smith with a new expression - she has stopped taking notes) And that-that steering committee, or whatever it is, they've got to see it like that. And I know Senator Paine will do all he can to help me, because he's a wonderful man, isn't he Miss Saunders? You know, he knew my father real well.
Saunders (uneasy): He did.
Smith: Yeah, yeah. We need a lot more like him, his kind of character, his ideals.

And as part of the "particulars," he dreamily describes the 200 acres in his state [Montana or Illinois] where the boys camp will be situated. Increasingly, Saunders is captivated and transformed by his story, and begins to incorporate his idealism into her own thinking:

I've been over every single foot of it. You could have no idea. You just have to see it for yourself. I don't know. The prairies and wind leaning on the tall grass and lazy streams down in the meadows, angry little midgets of water up in the mountains, cattle moving down the slope against the sun. Campfires and snowdrifts. You know, everybody ought to have some of that sometime in his life. My dad had the right idea. And it all worked out. He used to say to me: 'Son, don't miss the wonders that surround you because every tree, every rock, every anthill, every star is filled with the wonders of nature.' And he used to say to me: 'Have you ever noticed how grateful you are to see daylight again after coming through a long dark tunnel?' 'Well,' he'd say, 'Always try to see life around ya as if you'd just come out of a tunnel.'

Saunders responds to a question about where she has lived all her life: "Well, I guess I've always lived in a tunnel...Baltimore, pure city dweller." Smith gratefully compliments her on her career and abilities:

I've never known anyone as capable and intelligent. Gosh, I don't know where'd I be in this bill of mine if it wasn't for your help.

He pesters her until he learns her detested first name - Clarissa, but then continues to call her by her last name.

In his dictation of the draft of the bill for a boys' camp in his state, Smith happens to choose the same site that has already been earmarked for a corrupt dam project sponsored by Paine - the canyon surrounding Willet Creek. The revelation astonishes Saunders:

Smith: About 200 acres, uh, situated in Ambrose County, Terry Canyon, running about a quarter of a mile on either side of Willet Creek...
Saunders: Uh! What?
Smith: Willet Creek. Willet. W-I-L-L-E-T. It's just a little stream.
Saunders: In Terry Canyon?
Smith: Well yeah, yeah. You don't know it, do ya?
Saunders: No.
Smith: Well no, you couldn't. You've never been there, you said.
Saunders: You've discussed this with Senator Paine and everything, haven't you?
Smith: No, no why?
Saunders: Oh nothing.

In the Senate gallery, Saunders tells Diz that the young Senator will be the "principal actor...Don Quixote Smith - Man with Bill" in a dramatic play. Other "supporting characters" in the drama are "that gorilla in man's clothing - McGann (Puss and Boots)...mostly Puss" and "another prominent character" Senator Paine, dubbed "The Silver Knight - Soul of Honor on a Tightrope." She predicts, rightly, that Senator Paine (on the floor) and McGann (in the guests' gallery) will suddenly depart from the Senate when the subject of Willet Creek is introduced:

Don Quixote with bill will get to his feet in a minute and speak two important words. Willet Creek. When that happens, the Silver Knight will fall off his tightrope and Puss will jump out of his boots.

The President of the Senate recognizes "the rather strong-lunged junior Senator" when he jumps to his feet, shouts "Mr. President," and startles the dignified group of Senators. As Smith begins to introduce his bill, his hands and voice shake tremulously and the type-written bill weakly flops over in his hands.

Paine and McGann both race from the Senate floor when they hear the words "Willet Creek" in his proposal for a boys camp. But Smith's proposal is cheered by young Boy Rangers in the balcony and applauded by the Senators who realize Smith's virtuous deed. The President of the Senate suggests voice lessons: "Our young Senator will make a good orator when his voice stops changing." Immediately, letters with donations to support the boys camp pour into Smith's office.

Senator Paine maneuvers to have his daughter Susan be a decoy by waylaying and distracting Smith and keeping him ignorant. The plan is to have him escort her to a reception during an important Senate session. Susan tells Saunders: "I'm elected to snatch Mr. Jefferson Smith from the Senate tomorrow...I'm to take him out and turn my glamour on for him." Savvy to Paine's manipulations and conspiracy, the tough, "wised up" Saunders is worried, jealous, motherly and endearingly protective of her guileless charge:

Saunders: I don't mind who gets licked in a fair fight, Diz. It's these clouts below the belt I can't take. Sic-ing that horrible dame on him when he's goofy about her...Paine!
Diz: You'd better be nice to that gal. The latest poll rates her old man the party choice for the White House. She may be the next First Lady of the land.
Saunders: Imagine reading 'My Day' by Susan 'Pain' in the Neck. He's gonna be hurt enough as it is. She has to twist a knife in him too. Regal jack-ass. 'I'll turn my glamour on him,' she says.
Diz: Oh forget it. What's it to you?
Saunders: Nothing, I was just saying...
Diz: OK, OK. Then stop worrying. I told you the dopes are going to inherit the earth anyway.
Saunders: I wonder Diz, if this Don Quixote hasn't got the jump on all of us. I wonder if it isn't a curse to go through life wised up like you and me.

Disgusted by the exploitation of Jefferson's vulnerable weaknesses, Saunders drinks away her problems with Diz. She reveals her "sappy" love for country-bumpkin Smith and, with a caricature of a criminal's voice, she becomes jaded and vows to quit her job:

I won't take it, see. I won't be party to murder, see. Steering a poor dope up blind alleys for that grafting Taylor mob is low enough, but helping that dame cut him in little bits and pieces, nobody's gonna make me do that, no sir...I'm gonna get out of there right now, Diz. Right now, bonus or no bonus! I'm clearing out of that office, everything I own.

Back at her office as she clears out her desk, she warns Smith that he should go home - Washington's ruthless ways are no place for him:

Why don't you go home?...This is no place for you - you're half-way decent. You don't belong here. Now go home.

She eloquently but grimly blows the whistle on Smith's ideals. She reveals everything by explaining how he was hoodwinked, and how Paine's Deficiency Bill on the projected site for a boys camp is a front for party Boss Jim Taylor's own plans to appropriate funds:

Deficiency Bill. Section Number 40. A dam going up where you think your camp's gonna be. Ever hear of it. Nooo! They read all about it in the Senate today, but you weren't supposed to hear. That's why that ritzy dame took you in tow. That's why they sent you here in the first place, because you don't know a dam from a bathtub. Go ahead. Be a Senator. Try to mess up Mr. Taylor's little graft. But if you can't, and you can't in nine million years, GO HOME! Don't stay around makin' people feel sorry for you.

Suspicious of the proposal for a dam in a useless, unnecessary location ("there are a hundred other places in the state that really need the water") and under surreptitious circumstances, Smith tells Senator Paine that he fears something unethical: "Now doggone it, there's something wrong here, I know there's something wrong. And I'm not gonna vote on that thing until I get some more questions answered." Senator Paine firmly calms him down:

Jeff, you're fighting windmills...Sure, you're trying to understand in a moment everything about a project that took two years to set up. The reasons, the benefits.

Jeff stuns Chick McGann and Senator Paine when he divulges his knowledge that Taylor's idea is "to get graft." Taylor is immediately phoned by McGann and summoned to Washington. Before he departs, Taylor mocks Hooper's earlier promises about Smith's appointment to his face:

Boy Ranger huh? Answer to a prayer? Manna from heaven. Didn't even know how to tell the time of day, huh?...He's about to blow the whole machine to smithereens and you with it, Mr. Governor.

Taylor comes to Washington to "pull that steamroller stuff." Senator Paine objects to Taylor's and the machine's strong-armed shenanigans and tactics as his conscience battles corruption: "Your methods won't do here. This boy's a Senator. However it happened, he's a Senator. This is Washington, Jim...This boy's different. He's honest. Besides, he thinks the world of me. We can't do this to him!" But Taylor, first surprised and then annoyed, refuses to stand by idly while Smith challenges his authority:

Well, what do you want me to do? Stand around like you chumps and let that drooling infant wrap that Willet Creek Dam appropriation around my neck! Not me, ha, ha, ha. Either he falls in line with us and behaves himself or I'll break him so wide open they'll never be able to find the pieces.

Senator Paine "won't stand for it" and wants no part in "crucifying" the young Smith. Taylor reminds him that the machine's corrupt tactics put Paine into a position of respected power twenty years earlier:

Our steam-roller methods are getting too hard for your sensitive soul. Is that it? The Silver Knight is getting too big for us. My methods have been all right for the past twenty years, Joe. Since I picked you out of a fly-specked hole in the wall and blew you up to look like a Senator. And now you can't stand it.

Taylor turns on Paine and challenges him with an ultimatum, suddenly threatening to drop him and ruin his career if he doesn't conform: "Go in and explain to Mr. Smith about Willet Dam. It's your bill, it's your reputation and if he can't find enough facts to break you with, you just send him to me and I'll give him a couple of good ones." Paine backs down and agrees to cooperate with Taylor's schemes.