The Battle for America 2008

by Haynes Johnson

  When Schmidt did an interview with one organization, he was asked to supply proof that the baby was hers. Told by campaign officials about the repeated inquiries about whether Trig was her baby, Palin responded, “What do they want me to do, show them my stretch marks?” To kill the rumors about Trig, the campaign revealed that Bristol was pregnant and therefore could not be Trig’s mother, though they had hoped to get through the convention without having to confirm the daughter’s pregnancy. When on Monday morning Steve Holland of Reuters flashed an exclusive story on the wire revealing Bristol Palin’s pregnancy, the news created another firestorm.

  Conventional wisdom gyrated wildly in those opening days. Republicans in St. Paul were ecstatic about their new vice presidential candidate, but each day brought new questions or rumors about her. Not all of them were accurate, but enough were to keep alive questions about McCain’s judgment. “Sarah Who?” had been replaced by “Who is Sarah?” “What was John McCain thinking?” had been replaced by “What did John McCain know?” Fighting inaccurate information was only part of the challenge. Shaping her image became crucial. “We’re letting you guys paint the picture [of Palin] before we even get into the game,” campaign manager Davis grumbled to a group of reporters.

  With the convention about to open, the mood inside the McCain camp had gone from euphoria over the immediate reaction to Palin’s selection to apprehension as the questions about her mushroomed. McCain’s team was spread thin, dealing with multiple problems. Davis was scrambling to rewrite the convention schedule as Hurricane Gustav bore down on the Gulf Coast. Republicans wanted no Katrina reruns; they did not want to be seen celebrating in St. Paul while people were suffering in the aftermath of another devastating storm.24 Monday night’s opening session was scrubbed, which had the side benefit of keeping Bush and Cheney from speaking, but the schedule was still a work in progress.

  Schmidt was busy running the crisis communications operation on Palin. Salter was working on McCain’s acceptance speech. Palin was in her hotel, sequestered away from reporters and photographers, working with Matthew Scully and Nicolle Wallace on her speech and going through briefings with foreign policy advisers.

  There was other activity as well. Palin was acquiring a new wardrobe to see her through the convention and the campaign weeks after. She left Anchorage on Wednesday with only a small bag of clothes. A campaign official had called Wallace over the weekend. Could she pick out some outfits? “I said, you want me to go shopping? I can’t do that, I’m leaving for Minneapolis in the morning,” Wallace recalled. “They said, no, just find someone. I made a few calls. There are personal shoppers who do that for people who are too busy to shop, and then the campaign entered into a contract with them. I made one call to Kris Perry, her assistant, to find out what she liked. . . . So I had one more conversation on the front end with the shoppers and said she’s petite, she looked great at her announcement, that’s her signature look.” Now there were racks of clothes in the suite and a seamstress was making sewing machine alterations to the garments. There were several sizes of the same outfit being tried on and fitted, and many pairs of shoes from which to choose. At one point someone said to no one in particular, Do you realize how much there was? Another person guessed tens of thousands of dollars’ worth. But there were too many other pressing matters to worry about the clothes.

  Despite the disorder, Palin concentrated on her convention speech and on prepping for the campaign trail. “She had an ability to focus that’s unbelievable,” Wallace said. Scully was working from a template: a speech draft written in advance without knowing whom McCain would pick. After a conversation with her the day after her rollout, he delivered a new draft on Monday afternoon. Palin liked what she read, including some of the tough lines of attack. Wallace helped her with her delivery. The campaign had also hired a speech coach, Priscilla Shanks, to help modulate Palin’s sometimes grating voice.

  Palin’s practices began on Tuesday night in a specially equipped room in the convention center. Her delivery was workmanlike but not exceptional. She was the kind of politician who fed off the energy of her audience. “There was never a delivery of the speech in prep as powerful as her delivery in the hall,” one official recalled.

  By the night of her speech, Wednesday, September 3, the stakes were extraordinarily high. Shortly before she took the stage, a McCain loyalist sent us a message. “Frankly, it’s all or nothing. She’ll either float the boat or sink it,” he said. “It’s classic McCain.”

  The Palin who appeared on the stage at the Xcel Energy Center that night bore no resemblance to the negative caricatures of her in the press. Poised, charming, and combative, she roused the Republican audience with a speech that took on Barack Obama, the Democrats, and her critics in the press. “I’ve learned quickly these past few days that, if you’re not a member in good standing of the Washington elite, then some in the media consider a candidate unqualified for that reason alone,” she said. “But here’s a little news flash for all those reporters and commentators: I’m not going to Washington to seek their good opinion—I’m going to Washington to serve the people of this country.” When Palin described herself as “just your average hockey mom” from a small town, the audience began to chant, “Hockey moms! Hockey moms!” She paused for a moment, then responded, “I love those hockey moms. You know, they say the difference between a hockey mom and a pit bull?”—and here she paused theatrically—“Lipstick!” It was a line that had not appeared in any of the drafts of the speech.

  Palin’s speech electrified the convention. Overnight, opinion turned in her favor. On Thursday, McCain followed with an acceptance speech that included a description of his time in a North Vietnamese prison camp, which in his first campaign he had avoided talking about, and ended with a rousing call to arms. “Stand up, stand up, stand up and fight!” he shouted over sustained applause. “Nothing is inevitable here. We’re Americans, and we never give up. We never quit. We never hide from history. We make history.”

  The Republicans left St. Paul united and energized. McCain’s team loved the chaos their Palin choice had created and remained on offense. The Democrats attacked McCain and accused his team of dishonesty in their ads, but Gallup’s tracking polls showed a reversal in the race. The weekly average on the eve of the Democratic convention showed the race tied. The weekend after Denver, Obama held a six-point lead. By the end of the Republican convention, Obama was ahead by just two points. By the end of the next week, McCain was ahead by two points.

  Obama’s team now felt the heat from second-guessers from within their own party. Obama said to his top advisers that, based on his own incoming BlackBerry traffic, they must be deluged with criticism. “I remember the ten days after Sarah Palin got picked was the roughest ten days of the general election,” Messina said. “In D.C., there was panic.” Messina participated in a weekly conference call with Democrats in Congress. Normally he would make an opening statement and then answer questions. The week after the Republican convention, he said, “I got two words out of my mouth and people began shouting at me.”

  Obama told his advisers during one of their nightly calls to hold firm. “We have a plan. We know what we’re doing. We’re going to execute the plan.” Still, his advisers were irritated by the lack of confidence from Democrats outside the campaign. Plouffe deliberately let his frustrations show when he told the New York Times, “We’re familiar with this. And I’m sure between now and November 4 there will be another period of hand-wringing and bed-wetting. It comes with the territory.”

  For all their outward calm, Obama’s team was rapidly making adjustments. Having been intimidated by the celebrity ads in early August, they began to recognize their mistake. McCain and Palin were now drawing huge and enthusiastic crowds while Obama was doing small events—and losing the edge in intensity that had been so much a part of his primary campaign. His advisers decided to resume the big rallies. They needed an infusion of energy. Whatever they thought of the long-ter
m effect of the Palin pick, they recognized that she had taken over the campaign.

  Palin was now a huge celebrity, at least the equal of Obama’s star-quality status, and a cultural phenomenon. Tina Fey returned to Saturday Night Live with a dead-on caricature of Palin’s windshield-wiping waves, her designer glasses, pursed lips, and winks. “I can see Russia from my house,” Fey-as-Palin said with a twinkle. Palin was perhaps the only politician in America who could simultaneously energize the Republican base and give a jolt to SNL’s ratings. But she remained a work in progress, as her advisers were well aware. The week after the convention she returned to Alaska to see her son Track deploy to Iraq and to conduct her first interview with a network anchor. The session with ABC’s Charlie Gibson was no home run, but neither was it the disaster that some of her critics had predicted. She was still providing lift to McCain’s candidacy.

  Ten days after the Republican convention, on the night of September 14, Obama met with his senior advisers at the offices of Axelrod’s firm. Plouffe and Gibbs were there. On the phone were communications director Anita Dunn, pollster Joel Benenson, and media adviser Jim Margolis. Obama was not looking for a discussion that night as much as he wanted to deliver a message—as he had done in July 2007 when his campaign was flagging. He was worried that the campaign had become too reactive. “He thought we needed to get back on our game,” Dunn recalled. “His basic thing was we’re in the stretch here. We’ve got three debates, a limited number of days. We’re slightly ahead or tied and we need to go win this thing.”

  At that moment, his Palin gamble had achieved what McCain hoped. He had shaken up the campaign to keep the election within reach, despite the very tough climate.

  CHAPTER TWENTY-SEVEN

  Collapse

  “If we don’t act boldly, Mr. President, we could be in a depression greater than the Great Depression.”

  —Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke to Bush in the White House

  Six weeks before the election, panic was spreading throughout America’s financial markets and around the world. It was against that background on Wednesday, September 24, that George W. Bush invited John McCain, Barack Obama, and congressional leaders for a White House meeting the next day. The subject: the urgent need to pass an emergency financial bailout plan providing more than $700 billion to calm the markets and stem the economic chaos.

  For weeks Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson had been warning the president about the danger of imminent economic collapse. In March, Bear Stearns, the fifth largest investment bank and a global powerhouse with some $350 billion in assets, had declared bankruptcy after its stock plummeted to an almost unbelievable low of two dollars a share. A last-minute bailout of U.S. taxpayer funds failed to save it. Bear Stearns, which had survived the 1929 crash, was swallowed up in a merger with J. P. Morgan Chase. Since then, there had been one shock wave after another, forcing some of the most venerated financial players either to merge or go out of business.

  On Sunday, September 7th, came the stunning news that the federal government had seized the mortgage giants Fannie Mae and Freddie Mac, putting a liability of more than $5 trillion of mortgages on the backs of U.S. taxpayers. Over the weekend of September 13th, Lehman Brothers, whose history dated back to 1850, was forced into bankruptcy after desperate attempts to rescue it through mergers had failed. When the administration decided to let Lehman go and no U.S. bailout funds were offered, the bank ceased to exist. At the same time, the insurance giant AIG (American International Group) was teetering on bankruptcy, a prospect so alarming that on September 16 the Federal Reserve announced it was lending AIG $85 billion in exchange for nearly 80 percent of its stock. (Three weeks later, that immense bailout hadn’t achieved its goal; the Fed was forced to increase its AIG loans to nearly $123 billion.)25 In the meantime, banks were refusing to lend to each other or to customers, the price of insuring against bankruptcy was soaring to levels never previously seen, panicked investors were withdrawing funds from stocks, bonds, and money market accounts and putting them in U.S. Treasury bills, considered the safest investment in the world. Retirement funds, college endowments, foundation assets were being slashed by a third or half.

  These were the catastrophic events that led Paulson and Bernanke to warn Bush in the Roosevelt Room across from the Oval Office that the U.S. capital markets were “just so frozen” that stronger government action would be required to avert another Great Depression—or worse. They would have to ask Congress to take extraordinary action to create instant bailout/rescue funds of historic proportions, perhaps as high as a trillion dollars.

  It was John McCain who precipitated Bush’s summons for him and Obama to join congressional leaders to “come together at a time of crisis” as they had after 9/11. McCain publicly urged the president to convene that crisis meeting, saying in a New York statement on Wednesday, September 24, “if we do not act . . . every corner of our country will be impacted. We cannot allow that to happen.” After hearing from McCain, Bush called Obama that day to issue his invitation to the crisis meeting. The president sounded almost apologetic, a senior Obama aide told us, adding that he was not sure the meeting was needed, but McCain was insistent.26

  These dramatic events began earlier that day when Obama phoned McCain at 8:30 that morning to propose that they issue a joint statement of support for the bailout. Hours later, when they spoke again, McCain told him that, because of the emergency, he believed they should both go back to Washington. Obama wasn’t sure. Robert Gibbs, who was with him, recalled, “Obama says let’s work through that but the first thing to do is let’s get this statement done.” McCain told Obama to have their staffs talk. Shortly after that, McCain went on TV with a dramatic announcement. He was going to “set politics aside,” suspend his campaign, pull down his television ads, cancel an appearance on the Letterman show, and return to Washington the next morning to deal with the economic crisis. He also said he would not participate in his long-scheduled, long-anticipated nationally televised first debate with Obama just two days away. Obama was dumbfounded when he heard the news. Other than McCain’s proposal that they both return to Washington, McCain had said nothing about suspending his campaign and bailing out of the first debate.

  For John McCain’s presidential hopes, his decision came at a critical moment. The week before, while markets were crashing and fear was spreading, he repeated what he had said before: “The fundamentals of our economy are strong.” That comment was seen as one of the biggest blunders of his campaign, recognized instantly as such by both the Obama and the McCain teams, and it forced McCain to begin backpedaling at his next stop. Then when he offered a sharply contradictory warning that the same fundamentals “are at great risk,” he appeared uncertain about what he really thought. Throughout the week, McCain had scrambled to find the right message to deal with an economy in crisis. Obama, who was in close touch with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, awaited further developments. McCain was suddenly taking a huge gamble in returning to Washington. He hoped he would be seen as having put aside political considerations to help fashion the bailout legislation. But he also risked being portrayed as reckless in the face of a crisis—or exploiting it in an ill-considered publicity stunt.

  Newt Gingrich hailed his action, likening it to Eisenhower’s dramatic “I shall go to Korea” statement during his 1952 presidential campaign, which was credited with paving the way for the end of that war—and also electing Ike. McCain, the warrior, like Eisenhower, the great commander, was demonstrating his instinct for bold action.

  Rick Davis, McCain’s campaign manager, later told us the decision to suspend (though not to go back to Washington) was “the worst example of group think you’ll ever see.” Everywhere McCain turned for allies, he was shunned. On that day, having read of a plan proposed by Hillary Clinton, he had unsuccessfully tried to entice her into joining him for a public discussion of the housing c
risis. Next he met with leading Wall Street executives and economic advisers, where gloom and doom pervaded their discussion. McCain and his advisers then caucused, fearful that the downward spiral of the economy would be blamed on Bush and the Republicans. Davis said, “You know John. He’s a man of the moment. He came out of there like, this is the most important thing we have to worry about. Honestly, we just got each other all jacked up. One minute it’s go back to Washington. The next minute it’s suspend the campaign, next minute it’s like cancel Letterman, the next minute it’s like take our TV ads down. And the coup de grace was, oh, and we won’t go to the debate if this is not done by then, thinking that’s a nice way to put pressure on House Republicans. . . . It was just one of the ratcheting-up things that occur when you get excited. And we got excited. It was an unprofessional thing to have done, but we had gotten taken in by the moment.”

  The next day, Thursday, September 25, was crucial. After meeting for hours behind closed doors, the top congressional leaders emerged shortly before 1 p.m. They had reached broad agreement on the rescue bailout. “I now expect we will indeed have a plan that can pass the House, pass the Senate, and bring a sense of certainty to this crisis that is still roiling in the markets,” said Senator Robert F. Bennett, a respected conservative Republican from Utah and a veteran member of the banking committee. Their meeting, he stressed, “was one of the most productive sessions in that regard that I have participated in since I have been in the Senate.”