The Fed and the speech

It is fair to say that Wall Street was extremely nervous last week.

When momentum turned on Thursday against Ben Bernanke’s nomination for a second term as Fed chairman, the stock market shuddered. Traders in New York and across the globe tried frantically to get information to answer the question: Will Bernanke survive?

{mosads}Friday was a good day for Bernanke, as several legislators, including Senate Majority Leader Harry Reid (D-Nev.), came out in support of the man first nominated by President George W. Bush.

Bernanke is tarnished by the 2008 bailout. Most senators who say they will reject his nomination voted against the Wall Street rescue.

Still, he appears likely to get the 60 votes he needs for confirmation. Bernanke’s chances of getting through the Senate are probably better than those of healthcare reform.

President Barack Obama will use his first State of the Union address to revive the stalled legislation and, in what may be a sign that he’s going to be more prescriptive, the White House on Saturday endorsed a bipartisan bill that seeks to rein in skyrocketing entitlement costs.

The measure, sponsored by Senate Budget Committee Chairman Kent Conrad (D-N.D.) and Sen. Judd Gregg (R-N.H.), is opposed by Speaker Nancy Pelosi (D-Calif.).

But Obama knows he needs to be tougher on spending. His endorsement of the Conrad-Gregg bill is probably one of many steps along those lines.

Another is likely to be a federal budget that freezes discretionary spending. The toughest part for Obama, however, will be convincing appropriators to go along with this. As The Hill reported this month, the president has a lot of persuading to do.

There are many hearings this week, including testimony on the Christmas Day terrorist plot and the collapse of AIG.

Player of the Week: Barack Obama

Barack Obama’s speech on Wednesday will be a defining moment of his presidency.

A year ago, Obama had sky-high poll numbers and some lawmakers on both sides of the aisle were predicting healthcare reform could attract 70 votes in the Senate.

Times have changed. Obama’s approval ratings have plummeted and the Republican Party is energized by Scott Brown’s triumph in Massachusetts.

Healthcare reform is on the ropes.

Suddenly and shockingly, Obama and congressional Democrats are playing the underdog role.

It’s important, when one party is celebrating, to keep things in perspective. Obama is working with a comfortable Democratic majority in the House and he has 59 votes he can count in the upper chamber.

One of Obama’s strengths is that he doesn’t get too high when things are going well and doesn’t get too low when they aren’t.

On the campaign trail, he learned from his mistakes. When things weren’t working, he changed direction. Similarly, he now needs to pivot.

In his first address to Congress, Obama said he understood the public’s frustration with bank bailouts: “I promise you — I get it.”

Obama will need to convey he has gotten the message from Brown’s triumph. His administration has attempted to define bipartisanship as trying to work with Republicans. The thinking has been, if a bill didn’t get GOP support, it was still a bipartisan bill if Democrats reached out to the other side of the aisle.

That’s not bipartisanship, and the White House needs to acknowledge that.

To his credit, Obama has meet with congressional Republicans on a number of occasions. But Obama hasn’t written the legislation. Congressional Democrats have.

Obama expressed frustration with the Senate GOP in late December.

{mosads}In an interview with PBS, Obama indicated that the level of obstructionism in the Senate was “unheard of.”

Certainly, Republicans have made life difficult for Senate Majority Leader Harry Reid (D-Nev.). However, the key for Obama is to convince the public that he and his allies in Congress are very interested in a healthcare compromise. And if he accomplishes that over the next nine months and the GOP still balks, Democrats could do a lot better than expected come November.

Obama always said revamping the health system would be hard. He has been able to overcome many obstacles, but now the legislation is headed for a dead end. Obama must find another path.