Campaign 2008 Secrets: McCain Gambles on Palin

Campaign 2008 Secrets: McCain Gambles on Palin

In midsummer, the Obama campaign's computers were attacked by a virus. The campaign's tech experts spotted it and took standard precautions, such as putting in a firewall. At first, the campaign figured it was a routine "phishing" attack, using common methods. Or so it seemed. In fact, the campaign had been the target of sophisticated foreign cyber-espionage. (Article continued below...)

The next day, the Obama headquarters had two visitors: from the FBI and the Secret Service. "You have a problem way bigger than what you understand," said an FBI agent. "You have been compromised, and a serious amount of files have been loaded off your system." The Feds were cryptic and did not answer too many questions. But the next day, Obama campaign chief David Plouffe heard from White House chief of staff Josh Bolten. "You have a real problem," Bolten told the Obama aide. "It's way bigger than you guys think and you have to deal with it."

By late afternoon the campaign's chief technology officer, Michael Slaby, was on the phone with the FBI field agent who was running the investigation out of Los Angeles. Slaby was told that the hackers had been moving documents out of Obama's system at a rapid rate. Potentially, Obama's entire computer network had been compromised.

The campaign brought in a top tech-security firm to scrub its system. On Aug. 18 an Obama official was summoned to FBI headquarters in Chicago for a briefing, only to be told that the White House had ordered the FBI not to give the briefing. The Obama official asked why, and was told that three hours earlier the Feds had learned that the McCain campaign had been compromised as well.

The security firm retained by the Obama campaign was finally able to remove the virus. (The campaign's fundraising records were kept on a different computer system and were never compromised.) On Aug. 20 the Obama campaign got its briefing from the FBI. The Obama team was told that its system had been hacked by a "foreign entity." The official would not say which "foreign entity," but indicated that U.S. intelligence believed that both campaigns had been the target of political espionage by some country—or foreign organization—that wanted to look at the evolution of the Obama and McCain camps on policy issues, information that might be useful in any negotiations with a future Obama or McCain administration. There was no suggestion that terrorists were involved; technical experts hired by the Obama campaign speculated that the hackers were Russian or Chinese.

Obama himself was briefed, and his personal laptop was examined and found not to have been hacked. The Obama campaign took steps to better secure its computer system, including encrypting any documents used by the policy and transition teams. The Feds assured the Obama team that it had not been hacked by its political opponents, which was sort of reassuring. A senior McCain official confirmed to NEWSWEEK that the campaign had been hacked and that the FBI had become involved. White House and FBI officials had no comment earlier this week.

To David Axelrod, the stretch of August between Obama's triumphal tour abroad and the Democratic convention were "lost weeks." Looking back after the convention, Obama's chief strategist felt that the campaign had been in a "rut." Though the campaign publicly scoffed at McCain's "celebrity" ad as a bit of desperate fluff on the part of the McCainiacs, the more honest Obama advisers conceded that Obama had been knocked a little off stride, made more cautious. Axelrod decided to tone down the rock-star aspect of the campaign. The candidate was no longer scheduled into mega-rallies but rather performed at smaller, more-subdued events. Axelrod was a little uneasy about the coming Democratic convention in Denver. The campaign had already declared that Obama would address a football stadium full of supporters in Denver on the last night. The intention was to mimic John F. Kennedy, who in 1960 had departed the crowded convention hall to deliver his acceptance speech under the lights at the massive Los Angeles Coliseum. (The Obamaites also wanted to use the event to create a giant phone bank—everyone who attended was supposed to use their cell phones to call friends and family. Extra cell towers were brought in to accommodate the avalanche of calls and texting.) At Invesco Field in Denver, the production staff of the Democratic National Committee proposed erecting enormous white columns on either side of the podium with all sorts of lights and adornments. To Axelrod, the whole setup looked like an over-the-top version of ancient Greece—or, more likely, a scene set from the movie "Star Wars"—and he asked for something more modest and sober, simple but presidential. The designers came back with some white columns that vaguely resembled the arcade between the West Wing and the White House, still a little presumptuous, perhaps, but better than trying to re-create Mount Olympus.

The Obama campaign had always prided itself in staying away from the Washington hothouse of party hacks and lobbyists. But the nominating conventions are traditionally giant celebrations of the party establishment. Inevitably, there was some tension between Democratic regulars and the Obama insurgents on the road to Denver. Delegates and congressmen, normally showered with free tickets, were allotted relatively few in order to make room for grass-roots organizers. The freeze on freebies added to a chorus of complaints from Capitol Hill and the K Street Corridor: the Obama campaign wasn't listening, wasn't paying attention, wasn't seeking their advice—all of which was essentially true. The campaign did have Peter Rouse, who had been a top aide to Tom Daschle, the former Senate majority leader and close adviser to Obama. Rouse half-jokingly referred to himself as a "fixer." He proposed an elaborate outreach program to members of Congress, but the idea was rejected as too cumbersome and not really necessary. As one top adviser explained it, "Everyone loves a winner." If Obama won, all would be forgiven, the adviser said. And if he lost, well, it wouldn't matter. The Obama campaign did not want to get caught up in trying to satisfy all the interest groups that make up the modern Democratic Party—the one that had lost seven of the last 10 presidential elections. The John Kerry campaign set up elaborate liaison offices dedicated to ethnic groups, organized labor, groups for the disabled, for women, for gays and lesbians. Somewhat grudgingly, the Obama campaign agreed to have a single staffer devoted to each of these constituencies, but later decided the whole thing was a waste of manpower and dispersed the interest-group liaisons to go work in the field on get-out-the-vote operations.

There was some nervousness that the Clintons, with an eye on 2012, might try to steal the show, perhaps by demanding a noisy floor vote that would show how close Hillary had come to winning the nomination. The Obamaites figured that the Clintons could be counted on to do just enough to say that they tried to help Obama—but maybe not so much that he won in November. The Obama staff was petrified because nobody had seen a copy of Bill Clinton's speech, recalled Michael Sheehan, the veteran Democratic speech coach. There were two possible explanations: one, that Clinton planned to say something controversial that he didn't want to share beforehand; and, two, that Clinton was continually rewriting his speech. Knowing Clinton's work habits, Sheehan assured them it was the latter.

In truth, Hillary Clinton was on better terms with John McCain than she was with Barack Obama. The former First Lady and the four-term senator from Arizona had downed shots together on Senate junkets; they regarded each other as grizzled veterans of the political wars and shared a certain disdain for Obama as flashy and callow. In early June, on the night she officially lost the Democratic nomination, Hillary had enjoyed a long and friendly phone conversation with McCain. When Hillary finally did meet with Obama at the home of Sen. Dianne Feinstein a few days later, she told Obama that she did not want to go through a full-scale vetting for vice president unless he was serious about choosing her. The vetting process was onerous, requiring very full financial disclosure, and even included questions about romantic and marital indiscretions. As the financial crisis deepened in the summer, Eric Holder, Obama's chief veep vetter, added more questions about mortgages and problematic financial deals.

Obama was not inclined to choose Hillary, not so much because she had been his sometime bitter rival on the campaign trail, but because of her husband. "You don't just get Hillary, you get Bill," said a top Obama adviser. The Obamaites had benefited from Bill Clinton as a loose cannon in the primary campaign. They did not want to be wounded by him in the general election. Still, from time to time, as Hillary's name came up in veep discussions, and Obama's advisers gave all the reasons she should be kept off the ticket, Obama would stop and ask, "Are we sure?" He needed to be convinced one more time that the Clintons would do more harm than good.

The caution that had settled over the campaign in the wake of the "celebrity" ad crept into Obama's veep deliberations. Obama's personal favorite was Tim Kaine, the young governor of Virginia, a reformer who could win red-state votes. Like Obama, Kaine had come from a poor background but graduated from Harvard Law School. "I really like this guy," Obama said of Kaine. The one-term Virginia governor was the easiest to vet—"He's as pure as this," said Holder, waving a blank white sheet of paper. But, with the Republicans banging on about Obama as too inexperienced, Kaine was deemed to be too risky a choice. Early in the process, Obama announced, "I'm leaning toward Biden," the six-term senator from Delaware. Joe Biden had experience as chairman of the Senate Foreign Relations Committee, and a regular-guy manner that played well with the blue-collar vote. He talked too much and could put his foot in his mouth, but there was no meanness about him.

Holder, a former deputy U.S. attorney general in the Clinton administration and an old Washington hand, was struck by Obama's half-open, half-inscrutable manner during the nearly eight hours of meetings they spent together going over potential veeps. Obama was diligent, bringing up small morsels of information hidden in the fat briefing books, and he acted like a law professor who calls on reluctant pupils ("I haven't heard from you," he'd say to anyone around the table who had been silent too long). A lot of politicians pretend to be inclusive; Obama actually was. But "at the end, you didn't know where he stood. When you got down to the final judgment, I had a sense, but I didn't have any kind of certainty." Holder thought Obama was being shrewd to not signal his intentions too clearly—since "people want to say what the boss wants to hear, and if they don't know, you'll get more honest advice."

At the democratic convention in Denver, there were no unpleasant surprises. Both Clintons gave stellar speeches that stirred the base, the true believers in the hall and millions of Democrats watching on TV. (It did not go unnoticed in Obamaland that Hillary, toward the end of the convention, reportedly assembled her closest advisers in a hotel room to discuss her prospects for 2012.) Well aware that she would be watched in some living rooms with a coldly critical eye, Michelle Obama made sure that her speech was finished a month early and memorized it. Lest there be any doubt, in the speech she distinctly declared how much she loved her country. On opening night, she was visibly nervous before the cameras, but nonetheless elegant and beautiful. Michelle and her two precocious girls engaged in some stagy but cute banter by video with Barack, who had been planted in the living room of a white middle-class family in the Midwest to watch her speech. Obama pulled his usual all-nighters to draft his Thursday-night address. He was finally rehearsing the most important speech of his life with a teleprompter in his suite at the Hyatt when there was a knock on the door. The candidate stopped the speech to go to the door. It was room service. "All right," Obama said. "Who ordered the salad?" Axelrod sheepishly raised his finger and everyone laughed.

A few hours later, at 7:30 p.m., Obama walked slowly down a curtained hallway, dark and claustrophobic, to a small waiting area behind the stage. (The night before, Axelrod had ordered the setting toned down a little more—fewer lights, more American flags.) Obama paced in a slow circle, hand on chin, eyes downcast. He stopped, folded his arms, turned to face the stage for a few moments, then strode out, the roar of 80,000 people crashing around him.

His speech was solid, workmanlike, inspirational at moments—but not nearly as rousing as his stump speech in the primaries. Through much of the speech, Obama looked like just another Democratic presidential candidate reading from a list of promises. Obama was accepting the nomination of his party on the 45th anniversary of Martin Luther King's "I Have a Dream" speech at the Lincoln Memorial on the National Mall. Standing before the fake pillars on the Invesco Field stage, Obama briefly referred to "a young preacher from Georgia," but he did not mention King by name. Whether he was merely being poetic or avoiding using a name that still polarizes some white working-class voters, his advisers would not say.

But his closest aides were profoundly moved, perhaps less by the speech than by the distance they had come. Axelrod, who stood, crying, through the entire speech, appeared drained, all done in by the long march to this history-making night. Plouffe, the stoical campaign manager, looked nearly as wound tight as ever, but he confessed, "I cried. I was just shaking my head. You think back to all you've seen over 18, 19 months, and it's just hard to describe. Now we have nine and a half weeks to make it a reality."

Obama's chief of staff, Jim Messina, had slept only a few hours when his cell phone rang. It was still dark on the morning of Aug. 29. Messina and a few other staffers had gone to a bar to carouse after Obama's speech.

"Get your ass up," said the voice on the other end. "They picked Palin."

Messina could not mistake Plouffe's flat, no-nonsense voice, but he was still groggy. "F––– you," he said. "Why are you waking me up? Stop teasing me." "I'm serious," said Plouffe. "Get up and get your team together." Messina stumbled out of bed, thinking that Republicans must really be panicking, that they would never pick someone like Sarah Palin unless they were desperate.

Obama's plane was taking off from Denver airport around 9 a.m. when Axelrod got confirmation that McCain had indeed picked Palin as his running mate. He went to the front cabin to tell Obama and his new running mate, Joe Biden. Biden asked, "Who's Palin?"

McCain had initially wanted Joe Lieberman. The two senators were fellow romantics, deeply imbued with a sense of righteousness and honor. In mid-August, when NEWSWEEK's editor Jon Meacham was interviewing McCain aboard the campaign plane, the discussion turned to "The Winds of War," Herman Wouk's mega-bestseller about World War II. The main character, a naval commander named Pug Henry, was a favorite of McCain's. As it turned out, Lieberman—sitting just across the aisle and listening in on the NEWSWEEK interview—was a friend of Herman Wouk. "Let's go see Herman!" Lieberman piped up. "Yes!" exclaimed McCain. The two began planning a road trip out to Wouk's California home. "We can shake the money tree," McCain cackled (Wouk lives among the wealthy in Palm Springs, Calif.). McCain loved to travel with Lieberman, a fellow maverick who had stood fast on Iraq, nearly at the cost of his Senate seat in liberal Connecticut. McCain's other traveling buddy, Lindsey Graham, urged McCain to pick Lieberman, still a nominal Democrat, as a way to show that McCain put country over party label—and as a way to answer the Democrats' choice of the first African-American presidential nominee. "We've got to match history with history," Graham declared.

But when McCain brought up Lieberman's name at a secret high-level meeting held in Sedona, Ariz., to consider veep choices on Sunday, Aug. 24, his top aides balked. They warned that McCain's support among evangelicals was already soft. Lieberman was pro-choice on abortion, and a pro-choice pick would deeply antagonize the religious right, maybe even provoke a floor fight at the convention. Pollster Bill McInturff told the group that a pro-choice running mate had the potential to cause a 20-point drop in support among McCain's core voters. A small uptick in independent voters or crossover Democrats wouldn't begin to make up the difference. It would be very difficult for McCain to heal the party in the two short months before Election Day.

Lieberman was put on ice. So was former Pennsylvania governor Tom Ridge, another McCain favorite who was also pro-choice. On the shortlist, that left Tim Pawlenty, the governor of Minnesota; Mitt Romney, the former governor of Massachusetts; and a dark horse—the governor of Alaska, Sarah Palin. Romney made a certain sense; the country was heading into dark economic times and Romney, a former businessman, could compensate for McCain's self-professed lack of economic knowledge. But McCain viscerally disliked Romney during the primaries—and he owned too many houses (three, which meant that between them McCain and Romney would own 10). Pawlenty, the popular governor of a swing state the Republicans badly needed to win in November, was the safe choice. Salter especially liked Pawlenty's salt-of-the-earth qualities.

But McCain didn't want the safe choice. A top adviser would later recall that telling McCain that Pawlenty was "safe" was "like guaranteeing" that McCain would not pick him. Prodded by Schmidt and Rick Davis, McCain began asking about Palin, a first-term governor who had shaken up the Alaska political establishment by taking on her own party elders, who was fearless and defiant, who was … a little bit like McCain. He had called her that Sunday morning while she was attending the Alaska State Fair. It was a quick phone call, only about five minutes, and Palin had trouble hearing McCain over the noisy crowd. But McCain was intrigued. He told Salter and Schmidt to fly her down to Arizona and take a close look.

Schmidt and Salter met with her as soon as she arrived in Flagstaff on Wednesday. The three talked late into the night. Schmidt and Salter probed and pressed and looked for gaps between her views and McCain's. Palin shrugged off substantive differences. "What's the big darn deal?" she asked, smiling and, in her frontier-girl way, half defying, half flirting with her interrogators. With her flat accent and folksy charm, Palin was refreshingly down to earth, thought Salter. Salter had been wary; he had favored Pawlenty, who exuded a warm Midwestern solidity. Schmidt was pro-Palin from the beginning. He saw her potential as a conservative populist, the kind of throw-'em-red-meat, bash-the-elites politician who thrilled the Republican base that Karl Rove had so carefully nurtured through the Bush years. By picking Palin, Schmidt argued, McCain could snatch the "change" mantle away from Obama. Not for the first time, Salter came around to Schmidt's way of thinking. In the home of one of Cindy McCain's business associates, the two men tried to impress on Palin just how grueling the coming months could be. She did not seem intimidated—in the least. She was up front about her family, telling the McCain aides that her 17-year-old unmarried daughter Bristol was pregnant.

Palin stayed in Flagstaff on Wednesday night. Early on Thursday morning, Schmidt and Salter drove her to the cabin in Sedona, where she met for about an hour with McCain and chatted briefly with Cindy. Afterward, McCain and his wife took a walk along a creek running through the property. McCain consulted one last time with Schmidt and Salter. Palin would be a brave pick and she was a straight shooter, the two advisers counseled McCain. But she had no foreign-policy experience and was brand new to the national stage. McCain did not take long to decide. By 11 on that Thursday morning, he had asked Palin to join his ticket. Palin did not hesitate an instant to say yes.

The campaign was obsessively secretive about the choice. Charlie Black, one of McCain's senior advisers who was involved in the early discussions about Palin, was not told until very late Thursday night. Speechwriter Matt Scully and senior communications aide Nicolle Wallace were instructed to fly to Cincinnati and were given the name of a small, nondescript hotel. When they arrived they found Salter sitting on the curb, smoking, while Schmidt stared at his BlackBerry. The two men escorted them upstairs, saying virtually nothing. As they got out of the elevator Scully began to wonder, who the heck is behind the door? Colin Powell? Schmidt opened the door to the suite and said, "Meet our vice presidential candidate." It took Scully a few seconds to register who she was. Wallace, still a little dopey from painkillers from a root-canal operation, had no idea.

The Palin pick had the feel of a guerrilla raid, a covert operation. Salter, Schmidt and Governor Palin had checked in to the hotel under false names, pretending they were in town for a family reunion. The pirate ship was back! Muzzled and ordered to behave like a regular politician (run negative ads, avoid reporters, just read from the damn teleprompter), McCain had rebelled in his way by picking a fellow subversive—a sassy, shoot-from-the-hip, self-styled hockey mom who had shown those Big Oil boys a thing or two up in Alaska. It was romantic but also a bit impulsive. McCain's vetting operation had relied heavily on Internet searches for background checks. Davis had kept his eye on Palin for months, but it does not appear that the campaign did extensive interviewing and digging in Alaska. Some of McCain's aides were a little nervous about the Hail Mary quality of McCain's choice. As the GOP candidate introduced his running mate to the world on the morning of Friday, Aug. 29, from Wright State University's Nutter Center in Dayton, Ohio, one of his aides, watching from backstage, muttered, "We just threw long."

Other campaign advisers were gleeful as the pundits scrambled to make sense of it all. Some reporters did not even know how to pronounce Palin's name. But on Saturday night, a couple of reporters began asking questions about Bristol. Some had caught a glimpse of her, and explained to a campaign aide that she looked, well, pregnant. The aide denied any knowledge, but Schmidt tapped one of McCain's friends, Steve Duprey, to go have an awkward conversation with Palin. Told of the reporters' nosing around, she looked out the window briefly and replied, "We have a strong family. We've been dealing with this already. We're gonna tell Bristol. We'll be fine. Let's move on. What else do you have?"

Palin remained phlegmatic the next day when the left-wing blogs began speculating that 5-month-old Trig was actually Bristol's child and that Palin was covering for her daughter. When an aide told Palin that he had started receiving calls from "respectable news organizations" demanding physiological proof that Trig was actually Palin's son, she quipped, "What, do I have to show them my stretch marks?"

At the convention in St. Paul, Palin was completely unfazed by the boys'-club fraternity she had just joined. One night, Schmidt and Salter went to her hotel room to brief her. After a minute, Palin sailed into the room wearing nothing but a towel, with another on her wet hair. She told them to chat with her laconic husband, Todd. "I'll be just a minute," she said. Salter tried to strike up a conversation. He knew that Todd was half native Alaskan and a championship snow-machine racer.

"So what's the difference between a snowmobile and a snow machine, anyway?" Salter asked. "They're the same thing," Todd replied. "Right, so why not call it a snowmobile?" Salter joshed. "Because it's a snow machine," came the reply.

Later, Schmidt and Salter went outside so that Salter could have a cigarette. "So how about the Eskimo? Is he on the level?" Schmidt asked. Salter just shrugged and took another drag.

McCain loved the whole Palin family. They seemed to offer some relief, if not a touch of anarchy, to the Straight Talk Express, which had become a bit joyless. Piper, the governor's 7-year-old, thought nothing of crawling across Joe Lieberman's lap to get to her mother. Lindsey Graham mischievously enjoyed getting the child hopped up on Mountain Dew, a beverage to which he was mildly addicted. McCain relished talking to his running mate about guns and hunting in the wild. Duprey made up a T shirt that read OUR CANDIDATE FOR VP CAN HUNT, SHOOT, DRESS, COOK HER DINNER. JOE BIDEN ORDERS TAKE-OUT. Palin put on the shirt and gave him a hug. "I love this shirt," she said.

The morning after his own acceptance speech, McCain was more revved up than his aides had seen him in weeks. McCain had worked hard on the speech. After wrangling with Salter, he had agreed to talk about his POW experience. Salter had privately worried that McCain might choke up, but McCain just said to Salter, "Sit where I can see you, OK?" The speech ended with a dramatic kick, as McCain implored the crowd, "Stand up, stand up, stand up and fight!" Salter leaped up in the front row, clapping and furiously gesturing for McCain to "surf the wave" of crowd response.

McCain had been too wound up to get to sleep, calling Graham at 1 a.m. ("What'd ya think, boy?" "Home run.") He was still soaring eight hours later. In Cedarburg, Wis., he gestured toward Palin and exclaimed to the crowd, "Isn't this the most marvelous running mate in the history of this nation?" McCain's crowds were usually dwarfed by his rival's rallies. But with Palin by his side, the crowds suddenly swelled to Obama-size numbers—5,000, 10,000, 15,000 people. It didn't bother McCain that the people were there to see Palin.

Patti Solis Doyle, Neera Tanden and Karen Dunn, ex-Hillary Clinton aides working for Obama, watched Palin's convention speech on the TV. They looked at each other. "This woman's trouble," said one.

The mood at the normally staid Obama headquarters had been giddy when the news of McCain's veep choice was first announced. "OK, game over," someone ventured on the morning staff phone call. But anxiety soon set in. Axelrod was offended when one staffer dared to suggest that Palin was almost as good a politician as Obama. He said he was sure that the untested rookie Alaska governor would eventually implode. Plouffe was his usual "No-Drama Obama" self, urging everyone to calm down and wait for Palin mania to pass.

One senior aide would later recall that when Obama dipped in the polls and McCain appeared to nose ahead, thanks largely to a surge of new women supporters, he wasn't so much worried about the polls as about the impact on Obama headquarters. "People went a little Kerry and Dukakis there for a couple of days," he recalled. They seemed back on their heels, unsure of how to strike back at a woman who had so gleefully mocked Obama in her convention speech.

There wasn't real panic at Obama headquarters on North Michigan Avenue—such emotionalism (normal in most campaigns) was taboo. But Palin was so unexpected a choice that some staffers were rattled. So this aide, a veteran of some nasty campaigns, would go up to staffers and say, "Get her out of your head! It's McCain!" It was an effort to force the slightly dazed staffers to see that they needed to stay focused on McCain, not his running mate.

The vast flow of information unleashed by the revolution in media technology defined issues and character at warp speed. For months, the worst rumors and conspiracy theories had been aimed at Obama: the Illinois senator had been educated in a Muslim madrassa, he had taken his oath of office on a Qur'an, he was close friends with a former Weatherman bomber from the '60s. But Obama's aides began to notice that the media and blogosphere were now buzzing with comments attributed to Palin—that she wanted to privatize Social Security, that she read the magazine of the ultrarightist John Birch Society, that she had been a member of a political party that wanted Alaska to secede from the United States. The Obama campaign did not have to do anything but watch the rumors fly. "A lot of this is being generated by people in the outside world," the Obama aide noted, adding with a smile that "I believe our rumors are, at worst, truthy," borrowing comic Stephen Colbert's definition of information that sounds true, even if it isn't. The rumor mill was starting to drag down Palin in some key places like the swing state of Florida, where she was regarded in the senior citizens' condos as a dangerous right-winger.

This aide's other metaphor for the world of TV pundits and Internet bloggers was a kids' soccer game. The swarm moved from topic to topic (and target to target) in a pack, like a herd of yelping kids chasing the ball at Saturday-morning soccer. The trick was to try to nudge the ball in a certain direction so all the kids would follow. Sometimes this was as simple as linking news stories and sending them out to Web sites. As reporters descended on Alaska to look into charges that Palin had removed the chief of Alaska's state troopers because he refused to fire Palin's ne'er-do-well ex-brother-in-law, the Obama campaign had only to make sure the stories got wide distribution. As Palin's nomination stirred a feeding frenzy, reporters shifted their attentions from Obama to Palin. Though the Obama campaign had seeded the ground with some oppo research on Palin, with the arrival of investigative reporters like NEWSWEEK's Michael Isikoff "there's no point for us to be on it," the Obama aide noted in mid-September. Isikoff had been writing about Obama's ties to Tony Rezko. Now he was writing about Troopergate. "I thought, 'Go, Mike!' " the aide said. "Especially with the cover-up dynamic."

In mid-September, McCain was in Florida when the financial crisis broke. First the venerable investment-banking house Lehman Brothers announced it would file for bankruptcy, then the giant insurer AIG sought an emergency loan from the Federal Reserve, then the giant Merrill Lynch collapsed in a fire sale to Bank of America. At a rally in Jacksonville, McCain trotted out a familiar line from his stump speech. "The fundamentals of our economy are strong," McCain insisted, as he had for months. "But these are very, very difficult times … I promise you, we will never put America in this position again. We will clean up Wall Street. We will reform government."

At Obama headquarters, the oppo team wasted no time. "We're grabbing up YouTube, we're driving it, everywhere," an aide recalled. "McCain says economy 'strong'," read an e-mail from the Democratic National Committee. In Colorado, Obama openly mocked McCain, in a way that not too subtly depicted the 72-year-old senator as mentally out of it. "It's not that I think John McCain doesn't care what's going on in the lives of most Americans. I just think he doesn't know. Why else would he say, today, of all days, just a few hours ago, that the fundamentals of our economy are strong? Senator, what economy are you talking about?"

Now it was McCain's turn to seem caught unawares, to appear knocked back and unsteady. His campaign tried to explain that by "fundamentals," he meant American workers, and if Obama disagreed with that, well, then the Illinois senator was clearly against American workers. This spin was so outrageous that the regular traveling press laughed out loud.

McCain, the fighter pilot, began to swoop and veer. On the "Today" show, he declared, "We are in crisis. We are in total crisis." He called for a 9/11-style commission to investigate what exactly had gone wrong. He was ad-libbing; his staff was caught by surprise. Obama attacked again, mocking McCain for offering up "the oldest stunt in the book—you pass the buck to a commission to study a problem." McCain never mentioned the commission again.

But he continued to lurch. He announced that as president he would fire Chris Cox, the chairman of the Securities and Exchange Commission. It was pointed out to him that the president does not have the power to fire the SEC chairman, who serves a fixed term. McCain, now in forgiveness mode, called Cox a "good man" but said he would ask for his resignation anyway.

McCain's campaign slogan, "Country First," was more than a slogan to McCain. It was his life and his family's legacy. So when the crisis deepened, and Treasury Secretary Henry Paulson announced that the administration would ask Congress to pass a $700 billion bill to rescue the foundering financial institutions, McCain's instinct was to plunge in. He saw himself as Teddy Roosevelt, "the man in the arena," but he became the butt of late-night ridicule.

On the morning of Sept. 24, Barack Obama tried to call McCain to discuss a joint statement, a kind of let's-rise-above-politics declaration endorsing the bailout bill. Obama had been talking by phone to Paulson and Federal Reserve chairman Ben Bernanke. Obama's cautious instincts told him he should stay out of the negotiations between Congress and the administration. He told his aides that he did not want to say anything beyond enunciating some broad principles (the need for bipartisan oversight, for helping Main Street as well as Wall Street, for cutting off golden parachutes for executives seeking federal aid). Obama had been impressed by the sincerity—and the deep worry—of the administration's top moneymen, and he didn't want to politicize the delicate bargaining process. He contemptuously referred to George W. Bush's reign as "the incredible shrinking presidency." In his deliberate way, he wanted to try to engage his opponent in a moment of nonpartisan calming of the waters.

But McCain took his time returning Obama's phone call. McCain's aides would later say that he didn't want to talk to Obama until he had firmed up his own plans. At about 2:30 that afternoon, McCain called Obama and told him that he was thinking of suspending his campaign, asking to postpone the first debate (scheduled for two days later) and heading to Washington to join the negotiations. About five minutes after the two men hung up, McCain went public with his plans. Obama's advisers were flabbergasted. In the ever-paranoid view of rival campaigns, they thought that McCain was somehow trying to set up Obama—at first refusing his phone call, then springing on him this elaborate plan to head back to Washington and suspend the campaign. Meeting with reporters, Obama seemed slightly perplexed by McCain's to-ing and fro-ing, saying that he saw no need to put off the debate—that presidents had to be able to do two things at once, and America needed to hear from the candidates now more than ever.

Scheduled to go on David Letterman that night, McCain canceled. But instead he gave an interview with Katie Couric of CBS. The late-night comic was merciless, mocking McCain for saying that he was rushing back to Washington when he was actually over in the makeup room at CBS. Letterman portrayed McCain as a doddering fool whose Metamucil had been spiked.

McCain was in a difficult place. Like Obama, he had taken seriously the warnings that the whole financial system was in peril, and that if Congress failed to pass a rescue package by Monday, a catastrophic credit crisis loomed. At the same time, he knew from friends on Capitol Hill that House Republicans were leery of the administration's bailout plan. If he stayed aloof, and the bill failed, he knew he'd get blamed. Unlike Obama, he could not float above the fray. "Getting involved was the only move we could make," Salter later said. But McCain's romantic, take-charge streak clouded his political judgment. He may have seen himself rushing back to Washington to save the day, but Washington didn't want him—not just the Democrats, but his own Republicans brushed him off. By seeking ethics reform and a compromise on immigration in 2007, McCain had antagonized many hard-line Republican congressmen. No Republican leaders rallied to McCain when he arrived in the Capitol. "They don't like him very much," a McCain aide ruefully acknowledged. McCain called Senate Majority Leader Harry Reid to tell him his plan, and the Democratic leader coldly read from a press release accusing McCain of coming to Washington to stage a "photo op." "C'mon, Harry," McCain privately protested to Reid, whom he had known for almost three decades. (Hanging up, McCain just laughed and shook his head.) McCain had asked Bush to summon all the congressional leaders and political candidates to the White House, but the session turned into an angry farce. After the Democrats had spoken, Bush turned to John Boehner, the Republican leader in the House. Boehner told the president he couldn't muster the Republican votes necessary to pass the bill. Shouting broke out. Barney Frank, the outspoken Democrat and chairman of the House banking committee, demanded to know where McCain stood. McCain remained uncharacteristically silent. He did not want to cross his fellow Republicans. (McCain later told his aides that as the shouting began, he wondered, "What the hell is going on?" and felt as if he had wandered into a freak show.) Obama just shook his head when he reported back to his aides. He told them that Treasury Secretary Paulson had gotten down on one knee to beg House Speaker Nancy Pelosi not to blow up the deal. "Henry, I didn't know you were Catholic," she said. She told him to go beg the House Republicans.

Thrown off track, the negotiations resumed again the next day, Friday, and McCain decided he could go to the debate after all. But when he returned to Washington from the debate on Saturday and asked to be included in the negotiations, he was rebuffed. McCain worked the phones anyway, trying to muster support for the bill. When the bailout legislation went down to embarrassing defeat that Monday, McCain's inability to rally his own party was painfully obvious. Not even the four Arizona congressmen, all of whom had endorsed McCain, voted for it.

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