LIVE BLOG: Obama’s State of the Union of 2010

9:12 p.m. ET: The No. 1 topic addressed in the State of Union: the bank bailout.

“I hated it, you hated it, we all hated it,” Obama said about the bailout. “It was about as popular as a root canal.”

His pitch for large banks to pay a special fee gets a rousing standing ovation. He frames it as the way for the federal government to recoup its bank bailout costs.

9:24 p.m. ET: “Jobs are the No. 1 focus in 2010 and that is why I am calling for a new jobs bill tonight.”

9:26 p.m. ET: Proposes using Wall Street repayment funds to finance community bank lending programs.

9:28 p.m. ET: Obama must have cited six or seven jobs programs that seem as though they’ll cost a tremendous amount of money, although there is no mention of their costs.

9:32 p.m. ET: “I am not interested in punishing banks; I am interesting in protecting our economy.” “We can’t allow financial institutions, including those that take your deposits, to take risks that endanger the entire economy.” “We have got to get it right.” (Republicans do not applaud this.) He has certainly expressed a conviction that he will not accept financial reform that lacks teeth.

(Where is the discussion on healthcare?)

9:42 p.m. ET: Obama proposes several student lending initiatives, at least one in exchange for a year of public service, for example.

9:43 p.m. Et: “Step up refinancing so homeowners can move into more affordable homes.”

9:44 p.m. ET: Finally, he gets to healthcare.

9:51 p.m. ET: Obama says bailing out the US economy cost $1 trillion.

9:56 p.m. ET: Camera catches Justice Alito shaking his head at the president’s proposals to limit lobbyists’ influence. Shocking to see a Supreme Court justice doing that.

10:02 p.m. ET: “Democrats are expected to solve problems, not run for the hills.” “We were sent here to serve our citizens, not our ambitions.”

10:05 p.m. ET: “Combat troops out of Iraq by end of August.”

10:11 p.m. ET: Too many Americans have lost faith in our largest institutions, our corporations, our media.” Doubts grow each time a “banker takes on foolish risks.”

10:17 p.m. ET: “I can’t change alone.” He’s in a campaign-like moment, sounding a call to work together to a better tomorrow. There is absolute focus on him right now. A remarkable moment.

CONCLUSIONS

Despite the gravity of the credit crisis, it is still remarkable how central the banking industry has become on the nation’s political agenda. It literally taints everything: healthcare, the deficit, jobs programs, etc. The banking lobby simply cannot match the molten heat of the current political agenda. It has certainly gotten worse for banking in the last eight weeks, and I see no reason why the political standing for the industry won’t continue to erode.

The last five minutes of the speech were just out and out remarkable. The brutal honesty he expressed — “our administration has had some setbacks; some of it deserved” — and then turning that into a call to action resonates so deeply with people. I can’t see how people won’t remember why they voted for him after those last few minutes of his address. As far as the implications of this for banking, again, it puts the banking lobby at a disadvantage. I doubt his approval rating will jump markedly, but it will jump.

GOP RESPONSE

Bob McDonald, Republican governor of Virginia, makes the response. McDonald attacks the jobs issue first. “Massive new federal spending” was supposed to keep unemployment low, but McDonald argues that it has not, and that the resulting deficit is too high.

The governor suggests that more oil exploration offshore should be permitted.

The governor argues broadly against additional regulation of enterprise, and that includes banks. Otherwise, there is no mention of banking regulation, controls or bailouts.