No Prize to the Noble Loser

The consultant recast the governor as a reformer eager to work with Democrats to revive the state's economy. Schmidt's message, which the campaign repeated relentlessly: "Cooperation." Schwarzenegger won with 56 percent of the vote, bolstered by large numbers of moderate Democrats. (Schmidt's own politics are sometimes to the left of his party. His only sister is gay, and during the GOP convention this summer he gave a speech to the Log Cabin Republicans urging them to keep pushing the party to endorse gay rights. "I admire your organization," he said. "Keep fighting for what you believe because the day is going to come.")

Schmidt never wanted to get back into presidential politics. But he admired McCain's willingness to buck convention and go up against his own party, and joined the Arizona senator as an unpaid adviser. He worked from home in California, where he lives with his wife (a former Navy nurse) and two young kids. At the time Schmidt joined up, McCain's campaign was flailing. The candidate was torn: should he court moderates who wanted to see the straight-talking McCain of the 2000 election, or try to repair his strained relationship with the conservative base? In the summer of 2007, McCain shook up his campaign and cleared out much of the senior staff. He asked Schmidt to help restore order. Schmidt urged McCain to play to his strengths as a war hero with worldly experience, and sent him out on a "No Surrender" tour— a series of town-hall meetings pegged to an Iraq withdrawal vote in the Senate that allowed McCain to talk up his support of the surge. McCain emphasized his position on Iraq all through the fall and winter. His win in the New Hampshire primary brought him back from the dead.

Another staff shake-up in June gave Schmidt more power to direct the campaign. Rick Davis remained as campaign manager, but McCain transferred some of Davis's duties to Schmidt, who took charge of the campaign's daily operation. In the weeks that followed, there were noticeable changes in McCain's world. Schmidt brought in television pros to make McCain's dreary, underlit events more telegenic. He pushed McCain to stop winging his stump speech and stick to a script.

Schmidt warned McCain that if he was serious about winning the nomination and the White House, he had to stop hanging out with reporters on the back of the bus. This was a tough sell. McCain joked that the press was his "base." Throughout the spring, McCain had talked about the day when he would have his own campaign plane outfitted with a couch for relaxed interviews. Schmidt told him that journalists were not his friends. "The press will turn on you," Schmidt said, according to a senior campaign aide who wouldn't be named talking about a private conversation. McCain thought he was being ridiculous, but changed his mind after an abortion-rights group made an attack ad using news footage of him hemming and hawing over a birth-control question on the bus. After that, reporters found themselves on the outs. During the summer, under Schmidt's insistence, the candidate went 40 days without a press conference.

McCain once hoped that this would be a more noble campaign. While Obama and Hillary Clinton dickered over the Democratic nomination, McCain showed his softer side, embarking on a tour of "forgotten" parts of the country—starting in Selma, Ala. But after the political conventions, Obama and McCain were still virtually tied in the polls.

Schmidt often blames the media for McCain's troubles, saying reporters have turned on his boss while giving Obama a free ride. In a conference call with reporters last month, he lit into The New York Times, which had written a story detailing Rick Davis's ties to Fannie Mae. "Let's be clear and honest with each other," Schmidt bellowed, his anger rising with every syllable. "Whatever The New York Times once was, it is today not by any standard a journalistic organization. It is a pro-Obama advocacy organization that every day attacks the McCain campaign, attacks Governor Palin and excuses Senator Obama."