This is a rush transcript of "Special Report With Bret Baier" from January 22, 2010. This copy may not be in its final form and may be updated.


PRESIDENT BARACK OBAMA: Today, because we took those actions, the worst of this economic storm has passed. But families like yours and communities like this one are still reeling from the devastation left in its wake.

SEN. JEFF SESSIONS, R-ALA.: I am not going to vote for him. He was a part of the Federal Reserve board and then chairman of it when this economic crisis hit us and devastated us financially and economically. He did not warn us against that.

SEN. CHARLES SCHUMER, D-N.Y.: I'm supportive of Bernanke but will continue to be a very strong critic of the Fed in areas where I disagree with them.


BRET BAIER, ANCHOR: Two stories here — the president in Ohio talking about jobs and the economy trying to turn the page from the tough week — for a tough week — for his White House. He used the word "fight" apparently 14 times in that speech today in Ohio.

The other story about Ben Bernanke, the Fed chair who is up for a vote in the Senate for his second term — just a few moments ago the Senate Majority Leader Harry Reid put out a statement. The Senate majority leader saying "While I will vote for his confirmation, my support is not unconditional."

It's close though. They are counting heads in the Senate. Let's bring in our panel — Steve Hayes, senior writer for the Weekly Standard, Nina Easton, columnist for Time and Fortune magazines, and syndicated columnist Charles Krauthammer.

Let's start with the Bernanke vote that wasn't originally going to be close but now is. Nina?

NINA EASTON, FORTUNE MAGAZINE: It's amazing. This atmosphere for this Fed chairman has not been as toxic since 1982 when the Fed chairman then Paul Volcker received two-by-fours by construction workers who were out of work.

And the interesting thing about this is the White House and the Fed didn't see it coming. They didn't think this nomination was going to be in trouble.

And part of the reason is that it was started by two gadflies, one on the left and one of the right. Ron Paul, the libertarian, who frankly was right about the Fed's loose money policies for years and contributing to the ills of the economy, but people weren't listening to him. And they weren't listening to him a couple months ago when he put forward this audit bill, his bill for a congressional audit of the Fred.

Bernie Sanders, socialist. He is an independent. He is from Vermont, but he calls himself a democratic socialist. He has been a real critic of the Fed for years, just as Ron Paul has. He used to call out Alan Greenspan on the carpet.

He has a bill that would — where he wants to disclose the names of all the banks that received some $2 trillion in emergency loans during this financial crisis. He wants those names disclosed.

Those two pieces of legislation are being used to hold up the Bernanke nomination. They want more openness on the part of the Fed, and they are also very critical of the Fed for not seeing this coming and for contributing to the problem in the first place.

And it's, like I said, the White House and the Fed didn't see this coming even as recently as late December.

BAIER: Well, there could be a Scott Brown factor in here for at least some of these votes, Charles.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: There surely is. And this is a perfect example of an administration in disarray. The reappointment of Bernanke is one of the good decisions that Obama has made. This is a guy who did save our economy in '08 and '09.

He made a lot of tactical errors, on the big issue, the one issue — we had a mountain of private debt that was becoming insolvent. It was going to destroy our economy. He nationalized it, which was the only way to do it. He has taken a lot of hits, but that was the right decision. Obama is right in reappointing him.

The reason that you've have got a lot of Democratic defectors on this, because, after all, the Democrats have a huge majority, even now in the Senate and in the House, is that they watch the president after the Massachusetts disaster pivot and become a populist, you know, all the rhetoric about the banks, the bank tax, denouncing the fat cats on Wall Street.

And the Republicans — the Democrats in the Senate are saying I walked the plank on health care. I'm taking a hit on his agenda. If he is going to become a populist, I will become a populist, also. The first target that walks into that room is the Fed chairman. That's why he is under attack.

It would be a disaster in the middle of a crisis as we still are, with uncertainty all over the world, if he were not re-nominated. It would be a huge hit on us and it would be a huge drop in the stock market.

BAIER: Steve, on that point, there are a number of lawmakers who came out and said I'm going to support him because the market could lose 1,000 points if he doesn't get through.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: Actually, I think that's a reasonable argument. Look, I think Bernanke deserves some blame certainly for the loose money policies that helped get us into the mess.

He also, as I'm not as enthusiastic as Charles is about him, but he certainly deserves some credit for taking the kinds of risks that he took to flood, basically flood the market with money and, you know, give — inject some liquidity, make things more stable. The question I think will be how he gets us out of it if he sticks around.

But in terms of, you know, what's causing all of these second thoughts, these sudden second thoughts, there is no question it's a Scott Brown moment. I mean, it has far more to do with Scott Brown than it has to do with quantitative easing.

EASTON: There are two things here. There is the economics of this. And in fact, when you talk to economists, the reason that the economy has seen any rebound that it has seen, which isn't a lot but it has seen it, is less because of the stimulus bill than because the Fed has put that money out there through these quiet programs with these acronyms, but they have gotten credit back into the market.

But there is a political story, which is, and I think Charles alluded to that, which is people are angry about the — that Wall Street, the bonuses on Wall Street, which were extraordinary, and Wall Street profits, where they are trading — frankly, they are profitable because they are trading on all that cheap money that the Fed is lending them.

So this has become a political symbol. Ben Bernanke is a political symbol for all the anger that people have right now about Wall Street.

BAIER: The Friday lightning round is next with your choice online the topic of the week. Stay with us.


BAIER: Every week on FOXNews.com, the Special Report homepage, viewers vote on what topic we should discuss first during the Friday lightening round. This is it — you can see the poll on our website, halfway down on the right-hand side.

As of 3:00 p.m. eastern time, more than 40 percent of the 2,000 plus votes went to Charles Krauthammer's wild card pick. And he just told me that he is rarely humbled, but he is humbled now.

KRAUTHAMMER: By the confidence that the viewers have placed in me.

It's a strategy question. You remember the House, a Democratic member of the House, you saw what happened in Massachusetts. What do you do purely as a political calculation on health care? Walk away, approve the bill that the Senate has passed as a way to ram it through, or start over and negotiate with the Republicans for a compromise?

The answer I would give, and the correct answer is — walk away, because if you engaged in negotiations with the Republicans, it will take months. And one of the messages out of Massachusetts is that the electorate looks as this as a distraction. It's not their top issue in spending another half year on this.

No matter how it turns out in the end, it's only going to hurt Democrats.

BAIER: Nina?

EASTON: You are wrong on your own question, Charles.

BAIER: I was afraid I might be.


EASTON: I think if you are a Democratic House member you look beyond parochial interest and you look to the interests of the White House because you are linked to them and the party, and it's suicide not to pass something.

If this White House doesn't compromise and doesn't get something through that they can call health reform, this is a president — keep in mind just a couple months ago we were saying his presidency is over if they don't pass health reform. And if you see the pot shots being taken over Bernanke, it's just going to just keep on rising.

He is going to be perceived as so weak that he can get nothing done and he is going to have trouble with his own base moving into the midterm elections. You are going to have a very un-energized, unhappy base.

HAYES: Charles, you were wrong, but not because you said you would walk away but because you said have said you were going to sprint away.

The public now believes that this is dead. To do what you are suggesting, even if it would potentially link them back up with the White House, would be to give it life again, try to bring it back from the dead, which I think would be worse than having had it passed in the first place.

BAIER: Quickly, what about the Republicans out there like Newt Gingrich who are saying Republicans should launch an effort to pass something and kind of grab the mantel. Don't do it?

HAYES: Bad idea.

BAIER: As a strategy?

EASTON: I do think that Republicans are going to be — now that they have been the recipient of a lot of goodwill the last couple of elections including Scott Brown, they do need to start coming forth with ideas. So I do think that it would benefit them to do that.

BAIER: OK, quickly, Eric Holder, the attorney general, he was essentially named by the White House as being the man who decided that the Christmas day bomber would be tried as a criminal, Mirandized and tried as a criminal. Steve?

HAYES: Well, that's the worst kept secret in Washington over the past three days. Everybody assumed it was Holder who did this.

The real scandal, I think, here is that senior intelligence officials were not even notified that this was taking place, and that they didn't consult with the intelligence community, who had a mountain of evidence on Abdulmutallab before they went and asked questions. So they asked questions without actually knowing anything when the U.S. government did in fact know quite a bit.

BAIER: Nina?

EASTON: And Steve I think has raised the question of is this White House going to throw him under the bus as they move forward. They see this as a political liability.

BAIER: Holder, you mean.

EASTON: Holder, I'm sorry. I think on that question, I think the White House, while it would probably behoove them to govern more like Bush on matters of terrorism, I don't think they are there yet and I think that they will continue to stand behind Holder.

KRAUTHAMMER: There is an even larger scandal here, which is that a year ago on his inauguration Obama abolished the old interrogation techniques and methods in an executive order, and then in August ostensibly established a group of interrogators.

At Christmas, the group didn't exist. It doesn't exist as of today. There was no way even if you wanted to have a high level detainee questioned in a way that would be effective after a year in office.

BAIER: Quickly — conservatives, pretty good week?

KRAUTHAMMER: You know, this is an amazing week. Massachusetts goes Republican, health care dies, and the Supreme Court unshackles the First Amendment. It's the best week I have had since spring break and medical school, and I don't even remember it.


And there was another item which you mentioned, Air America, the liberal talk show network, went out of business, which is a redundancy because nobody was listening anyway.

BAIER: I want to get this alert in, so, thank you all.

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