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The Undertaker

Tony Coelho and the Death of the Democrats

"Let me begin," says White House aide David Dreyer, "by contesting the premises of your question." It's a windless evening in November, and Dreyer is in his West Wing office, listening to a new recording of Bach's Well-Tempered Clavier and defending the role of Tony Coelho, for whom Dreyer once worked, in the Democrats' electoral debacle. "First," he says, "Tony was not the party chair. He was never, to my knowledge, actually in the dnc building. Second, the role of party chair in a midterm election is relatively unimportant anyhow. Third--let me finish, I want to get my points out--he gave good advice. I feel very comfortable with the terms of the debate and how voters reacted to them." He was not the party chair, he was the party chair, he was a great party chair. Asked whether Coelho will continue to advise the White House, Dreyer's gaze drifts toward his bulletin board, forlornly decorated with Election Day dedications. "Tony sees on our part, accurately, a failure to be sufficiently disciplined. He sees a failure to keep ourselves focused on the important, productive tasks of politics. Now he has to decide whether a continuing relationship with us is a commitment he wants to make." The clavier builds to a boisterous climax; and Dreyer briefly closes his droopy brown eyes. "I hope he will," he says. "I think he will. We need him."

To enter the DNC headquarters two weeks after the election is to walk into a sepulcher. "Speaker" Thomas S. Foley, "Senate Majority Leader" George Mitchell and "House Majority Leader" Richard Gephardt glower down at visitors from their positions in the vestibule, where they are interred in luminous, airbrushed portraits. The funereal mood extends even to the bathroom, where neon fliers trumpeting Democratic "victory" parties lie crumpled on the floor. Seated behind an oak pedestal writing desk in his plushly carpeted corner office, dnc Finance Chair Terry McAuliffe, also a former Coelho staffer, assesses the situation. "Yes, the elections were devastating," he says. "But Tony gave great advice. You can't blame the election loss on Tony Coelho." McAuliffe swivels around in his chair. "This is not a town known for profiles in courage," he says. "People are pointing fingers, looking for scapegoats. Well, guess what? Tony doesn't really care. He doesn't want the credit. He doesn't care if he takes the blame. He was asked to come in and help. And he did help. He did a masterful job. That's why there is a critical mass for Tony's continued involvement."

McAuliffe gazes out a large picture window overlooking the Rayburn Building. "Before, Tony's thing was to come in, strategize down the street and do the T.V. appearances," he says. "Now he's going to be managing the overall themes and thinking, helping formulate the long-term strategy. Why would he want to do that?... Because he enjoys coming down to the White House for meetings. Because he loves going on T.V., as everybody would. But most of all, because he loves this party. His whole life has been the Democratic Party." McAuliffe rises to his feet. "Tony is best friends with everybody!" he cries. "He's like a giant Saint Bernard. Everyone loves him. Now, there may be times when you're mad at the dog. And you may want to--kick the dog because of things he may have done. But, ultimately, you love Tony Coelho because he has a giant heart. He's like a big panda bear. People love Tony. And the reason ... is that Tony ... loves ... people."

Only a shuttle's hop away from Washington's vanquished Democratic establishment, on Seventh Avenue in New York, is Wertheim Schroeder Investment Services Inc., where the mood is utterly unfunereal. On the morning of my visit in early December, the place is aflutter with activity. Tall, imposing men in crisply pressed blue suits jam the hallways and huddle in conference rooms. "We've reserved 100 rooms at the lake resort, for our top 100 accounts," murmurs one financier to another. "We'd love it if you joined us up there." "That sounds fabulous!" says the associate, a compact man with salt-and-pepper hair. He is Tony Coelho. "All right, then!... It's been such a pleasure to meet with you!" And with that, Coelho turns on his heel and heads into his office, his cheeks flushed from the success of the meeting. "Sorry to keep you waiting," he says. "Potential client meeting. I think we got 'em!" And he rushes out the door again. "Gotta keep bringing those clients in!" he yells apologetically over his shoulder.

When he returns, it is to discuss not his latest business venture--Coelho refuses to disclose his client list--but rather, his glamorous parallel career as vision czar to the Democrats. "I didn't know the president before the end of last year," he muses. "But I've really grown to like him and respect him. I'm fascinated by his intellect. Fascinated by his commitment.... I'll do anything to help." Anything? "I've said it over and over again," he says. "Do I want to help? Yes. Will I help? Absolutely. Will I give up everything I'm doing in order to help? No. I just don't think it makes sense, either for me or the White House."

Coelho elaborates. "My ability to earn a living, to take care of my kids' future, is No. 1," he says ringingly. "And nobody is going to take that away from me. Now, I happen to believe--and I feel very strongly about this--that what we do is we discourage volunteers. We discourage people who are successful in other walks of life from helping out. The Naders of this world want to say there are conflicts. And I just think they're crazy. I think they are so, so wrong." A slow smile comes over his long, gaunt face. "I don't know if you heard the speculation," he says. "I was told by several people at the White House that there was a feeling that if they could just get me involved a little bit, I wouldn't be able to give it up, and I would get more and more involved until I came on full time. But I told them I won't give up my work at the bank. I like it too much. And I won't give up my corporate boards. I like 'em too much!" A compromise was reached. "When Leon [Panetta] got in there, he pleaded with me to come on board," says Coelho. "And I turned him down. So Leon and several others pleaded with me to then...advise." The calamitous consequences of his advice thus far have not diminished their enthusiasm. "I still go to the White House most Thursdays and Fridays," he says. "I go to the senior staff meetings. I answer any questions they might have.... I'm also helping Gephardt and the House Democrats as they think through the outcome of the elections. And I'm working with people on the Senate side." Coelho leans forward in his chair and his voice drops to a whisper. "The secret," he says, "is marketing. I'm very much into marketing.... Right now, when people think of us, they don't know what the message is. What is it that we're about? What does it mean to be a Democrat? That's where I think I can be of some help."

If that venture runs aground, if the marketer discovers that his product is being recalled, there's plenty to do at Wertheim Schroeder Investment Services, where Coelho is president and ceo. "This has been a major success here. We no longer have just one product. We now also have a mutual fund." Coelho's eyes are sparkling. "I've set the table. And now I'm just piling food on. I love business. I love networking. I love doing what I'm doing. And then to have the bank encourage me to remain involved in politics, to a degree--I mean, what more could you ask for?" Just then, his secretary knocks on the door. "Your car is here," she says. Coelho grabs a battered briefcase and heads out the door. "Sorry," he says. "I've got to jump on the next shuttle. I have a 3:30 at the White House."

When the White House summoned Coelho last August to run its political operation through the elections, hopes ran high. To stave off an embarrassment at the polls, Coelho told Newsweek on August 29, the Clinton administration merely required "a couple of old pros who know the town." He embarked on a tour of the talk shows, where he was hailed as a hero. "In the words of sort of everybody--they need you," cooed Charlie Rose on September 1. Of course, it didn't quite work out as planned. "Some people say that in this election, I gave the wrong advice," muses Coelho. "I always get a kick out of that. Because, you see, the people who say that were never in the room. They don't know what advice I gave.... If all my suggestions had been accepted, things might have been different."

Those who were in the room say his advice was embraced. White House Political Director Rahm Emanuel: "Tony was instrumental in the whole development of how to use the president's time and where he goes, as well as resources and strategy." Deputy Chief of Staff Harold Ickes: "Tony was here on a regular basis. I relied on him heavily. He was the first person to urge strongly that we take a hard look at the Republican contract and use it to frame the elections as a collision between Reaganomics and Clintonomics. He pushed hard on it.... He was key to our focusing on it."

The strategy bombed. The idea of nationalizing the elections, of having a debate between Clintonism and Reaganism, failed. "There's no question the strategy of trying to nationalize the election was a mistake," says Democratic pollster Mark Mellman. "It had no evidentiary basis....In exit polls, when people were asked: `Do you think we should go back, or not go back, to Reaganomics?' it wasn't at all clear that people didn't want to go back to the 1980s." Despite this, the Clintonites are still Coelho fans. "We're spending some time analyzing what went wrong," says Ickes. "Tony is a regular participant in those meetings. We find him very strategic, very tactical.... I'm confident he'll be very involved in the president's re-election campaign." Other Democrats are just as eager to learn from the master. "I bet Tony gets fifteen, twenty calls a week from members of Congress who want some assistance thinking about the future," says House Minority Whip-to-be Steny Hoyer. "He just believes in serving. As a matter of fact, he's now half an hour late to see me."

Remember Tony Coelho? The man with the funny name and the eager, falling face who left Congress in 1989 under an "ethical cloud"? Since when, you might ask, did he get to be so important again? The story of his re-emergence--and of his new centrality to the Clinton White House--is an enlightening one, in some ways an allegory of how far the early reformist zeal of Clintonism came to be hijacked by the Democratic establishment, with results so clear by last November 8.

Anthony Lee Coelho, the grandson of Portuguese immigrants, was born in 1942 and raised on his parents' dairy farm in California's Central Valley. The first in his family to attend college, he got a cute start in politics: Bob Hope, for whom Coelho worked as an odd-jobs man, suggested he apply for a job with his local congressman. In Coelho's oft-told account, it was a painful period in his life. He had just been diagnosed as an epileptic, a condition that frustrated his dream of entering the priesthood (medieval canon law forbids it). Politics was a solution. "It's obvious that you have this burn to help people," Coelho says Hope told him. "It's just killing you that you want to help people. If that's your bag, why don't you go to work for a member of Congress?" After days of prayerful introspection, Coelho agreed to give it a try. Hope co-signed a note to help Coelho get a bank loan to resettle in Washington, where he went to work as a staff aide to Democratic Representative Bernie Sisk of California. "I fell in love with the work," Coelho told Wall Street Journal reporter Brooks Jackson in 1988. "I fell in love with the fact that you could really change people's lives. I realized I could do much more in this job than I could as a priest." By the time Sisk announced he was going to retire, Coelho was his obvious heir. "In the last five years I was with him," Coelho recalls, "I'd go out to the district once a month and I was in the press all over the place.... I knew from day one I would be elected."

Coelho's liberalism, honed during ten years in Congress, reflected his beginnings. The priest manque thought of politics sacerdotally. What do members of Congress do? They secure good things for needy people--the elderly, minorities, the poor, farmers. Entitlements became the equivalent of good works. "I think we have to identify ourselves with certain groups of folks we're willing to die for, and make sure the system works fairly for them," Coelho explains. There's no sign that Coelho's ideology ever advanced beyond this Great Society vision of what politics is all about: no Clintonite recognition that some programs don't work, that some entitlements go to the wealthy and not the needy, that communities may need to take more responsibility for themselves. No recognition, either, that the authors of this largess might themselves be ethically suspect, or pampered too long by the perks of beneficent power. Which explains why Coelho was such a success in the established circles of congressional Democrats in the 1980s--but hardly why he became so central to the Clinton White House.

As head of the Democratic Congressional Campaign Committee from 1981 through 1986, Coelho built his reputation by finding ways to entice business executives and their lobbyists to shower Democratic candidates with campaign cash. As Coelho tells it, the difficult process of coming to terms with his epilepsy--it's now controlled through medication--gave him the "inner peace" to shake down wealthy businessmen with impunity. "What a lot of people don't know about me are my priorities," says Coelho, explaining his ease with big money. "My interest in disabilities, my involvement with the homeless--those were much more important to me than anything else. My fund-raising activities were a means for me to get done the things I wanted to get done in those areas."

As a freshman member in 1979, Coelho made a name for himself by shoveling large quantities of special-interest money into the coffers of Democratic incumbents. His creed, summed up in a 1985 speech to a lobbying group: "Special interest is not a nasty word." "There was a touch of envy," allows former Representative Guy Vander Jagt, who headed up the Republican campaign committee during the '80s. "As a fund-raiser, he was ten times more effective than I was." Coelho squeezed money from his targets by making bald references to his party's power. "We're going to be the majority party for a long time," he told the Los Angeles Times in 1986. "So it doesn't make good business sense to give to Republicans." Former top Coelho aide Martin Franks, now a vice president at cbs, recalls: "We looked at the list of the guys who were giving too much to the Republicans. And we basically gave them the come-to-Jesus message. `We know who you are. You've been cavorting with the devil. But understand something here. We're in power. And I suggest you deal with us. Or at least ... cover your tail.'" To his ethical critics, even among Democrats, Coelho had a simple retort: "It is basically a lot easier to raise money from pacs than it is from individuals," he informed The New York Times in 1983.

There was little Coelho wouldn't do in his indefatigable pursuit of campaign dollars. He held on-the-road fund-raisers, carting then-Speaker Tip O'Neill around the country in search of funds. Coelho's former pac Director Joseph Crepa, now chief of staff to Representative David Obey, recalls one trip with particular fondness. "Tony arranged a trip to Puerto Rico. It was a grueling trip. There was terrorism. There were these two warring factions.... It was a long day. Finally, we sit down with the governor of Puerto Rico and all the contributors. They give us cigars. They come out with this seventeenth-century brandy. Suddenly, Tip says, `I want to leave. Get me out of here. I want to go to bed.' He starts to walk away. The governor's staff guys start to scream at Tony in Spanish. And Tony drags the speaker back.... He was really tough on him."

During his years as head of the dccc, Coelho aggressively marketed the once pro-labor Democratic Party as increasingly pro-business, often during candidate forums for corporate pac managers. The contradictions of policy or philosophy never slowed him down. During these forums--nicknamed meat markets or cattle calls--Coelho forced candidates to stand behind tables, each with a name card and a place to display his or her literature. pac managers flocked to the hot candidates and left the others stranded and mortified. "That didn't work out so well," recalls Tom Nides, chief of staff to U.S. Trade Representative Mickey Kantor and Coelho's pac director at the time.

Coelho searched for, and found, other ways to showcase his products, or Democratic candidates. In one lucrative fund-raising innovation, he went so far as to sell access to the Democratic leadership of the House. He invented the Speaker's Club, which granted lobbyists and their clients the ability to meet socially with the Speaker of the House and other top Democrats for $5,000 per year for individuals and $15,000 for pacs. A brochure about the club stated: "Members of the Speaker's Club serve as trusted, informal advisers to the Democratic members of Congress." Asked by The Washington Post in 1983 what the generous givers of the Speaker's Club received in return, Coelho candidly replied: "Access. Access. They meet with the leadership and with the chairmen of the committees. We sell ... the opportunity to be heard."

Cheerfully, Coelho made new friends for the party. In 1985, with tax reform looming, he fought to retain the most criticized of all special-interest tax breaks, those received by independent oil and gas drillers--both of whom liked the tax code the way it was. This led to the formation of one of Coelho's more eye-catching schemes: the Council for a Secure America, a union of Texas oilmen and New York Jewish leaders to protect the oil industry's tax breaks and build support for Israel. "There ain't a whole lot of pointy silver-toed boots drifting around Madison Avenue," recalls Washington lobbyist Daniel Dutko, hired by Coelho to coordinate the venture. "The notion was, let's get Southern oilmen to know and understand the Jewish community. Let's take 'em to Israel.... Maybe they'll be more supportive of peace initiatives there. And what do you say we grab some of these Jewish scholars, and maybe a Schumer or a Downey, and send 'em down to an oil well and put a hard hat on 'em? Then they'll see the convergence of interest." Dutko continues: "This is consummate Tony Coelho. Tony rarely looks at one problem at a time. He's too efficient for that. He wants a bundle of problems solved at once." Alas, the council was denounced by Representative Dan Rostenkowski as a transparent fund-raising ploy, and Coelho was forced to disband it.

By the end of Coelho's tenure as head of the dccc, incumbent House Democrats were receiving more money from pacs than from individual contributors--and a higher proportion of their cash from pacs than House Republicans and senators of both parties. "I take the position that no incumbent should lose; that as the incumbent you have the tremendous advantage," Coelho told The New York Times in 1987. Coelho's money-grubbing was credited with saving his party from losing control of the House in 1982. During that period, Ronald Reagan's landslide elections gave Republicans hope of carrying the Reagan revolution into Congress. Thanks to Coelho, the longtime Democratic House majority held fast. But at a price: the period between 1981 and 1987 marked a time when the once-Republican business lobby gained a foothold among Democratic members, who adjusted their votes accordingly. Coelho's efforts ended up the subject of Brooks Jackson's Honest Graft, a devastating assessment of the corrupting influence of money politics. Coelho's dependence on special-interest money repeatedly affected his substantive positions on legislation. In 1985, for instance, Tip O'Neill publicly rebuked him for risking the integrity of the landmark tax-overhaul bill, which eventually was passed by Congress, in order to cultivate campaign contributions. On other occasions as well, Coelho found himself fettered by his ties to wealthy foes of reform legislation. In 1985 Senator David Boren of Oklahoma was advancing a proposal to put a modest limit on special-interest money in House and Senate elections. Coelho promised top pac managers that he personally would kill the Boren measure if it got out of the Senate. "I'm not going to let reformers scare me into thinking that I can't ask people for money," he declared to the Los Angeles Times. "I'm going to ask. I'm going to ask very passionately."

In 1987 Coelho was catapulted to majority whip in gratitude for his astonishing success in harvesting money from pacs. That year Representative Mike Synar tried to enlist him as a cosponsor of his campaign finance reform effort. "You need this," he told him. "You have a reputation as the guy who sucked up all the pac money in the world." Synar remembers the incident ruefully. "I tried to enlist him," he recalls. "But his vision was a little different than mine.... When I say campaign finance reform, I'm talking about limiting the amount of money in the system. Lowering the individual contribution. And limiting the total amount of money spent in a campaign. I think it's fair to say that he didn't share any of those three goals."

At some point in his bid to bring the means to Democratic ends, Coelho's interest in ends became somewhat muted. "Don't let your ideology get in the way of your business judgment," he counseled an audience of big-money contributors in 1982. In 1984 he told The New York Times that "it really doesn't make any difference what kind of law you create.... It's only the perception you create that's important. And the perception is created on T.V." He told columnist James Kilpatrick during the 1984 campaign, "The issues are not that important to a great number of people anymore. We have trumped Reagan. He's the grandfather, and Gerry's the future, and that is the trump." He repeated this to the Los Angeles Times: "The issues are not that important to people," he insisted. "Issues will take care of themselves."

So it was no surprise that when the reconstruction of the Democratic Party began fitfully in the 1980s, Coelho was uninterested. In 1987 he dropped out of the Democratic Leadership Council because of pressure from unions. To him, the right response to losing elections was not to rethink but to retool; to counter the Republicans with still more money. At an issues retreat in 1987, a group of Democratic congressmen discussed how to win back Reagan Democrats. According to an L.A. Times reporter who was present, one participant argued that the hope lay in "developing a fresh, new, national message." Another chimed in that Democrats "needed to be talking about the future and leaving Reagan to the past." But Coelho, then the third-ranking House Democrat, scoffed. "People are not interested in all this stuff about new ideas," he said. "All we have to do is stand up for what we believe in--and we win."

Coelho, it seems, saw little connection between "what we believe in" and "ideas." And "what we believe in" remained for him the litany of liberal interest groups. In 1988, the last full year he was in the House, National Journal, in its annual ratings of politicians, gave Coelho a perfect liberal score on social issues, a perfect liberal economic rating and a relatively liberal foreign policy score. He was particularly fond of the farm lobby, saying that Republicans "want to fund the contras but not to fund the combines." As chairman of the Agriculture Committee's Dairy Subcommittee during passage of the farm bill of 1986, he won House approval of industry-written provisions that paid farmers not to produce milk. Called the "Dairy Termination Program," it set taxpayers back $10.8 billion.

Coelho was no less fervent in defense of entitlements. The public has "to understand what it [deficit-cutting] means," he told The Washington Post in 1985. "Once the elderly understand it means cuts in Medicare, cuts in Social Security, they're going to come home to the Democratic Party." He played on the fears of the elderly: "The American people are not going to lose Social Security," he proclaimed on April 26, 1982. "And we Democrats are not going to let the administration take that issue from our party." This easy, reflexive conflation of his own interests and the interests of voters was a frequent feature of Coelho's statements. "Social Security is our ace," he gloated to The New York Times on April 16, 1982. "Why would we want to give up our ace?" During budget negotiations that year, some House Republicans, noticing that entitlement spending constituted the fastest-growing share of the federal budget, hinted that they were considering cuts in Social Security income adjustments. Coelho responded by urging Democratic candidates to make Social Security an issue in the midterm elections. He played the same card in 1986, mailing to 200,000 donors a fund-raising letter charging that the Reagan administration would be "callously slashing benefits and services" of the Medicare and Medicaid programs if the Democrats weren't on hand to prevent it.

Coelho also emerged as a protectionist. As head of the DCCC, he coached candidates in what became known as "economic nationalism." One of the generic T.V. ads his campaign committee produced for Democratic candidates in 1986 showed workers vanishing from farms, factories and offices, and blamed Republican trade policies. He encouraged candidates to hold press conferences in front of padlocked plant gates. Insisting that a tough line against foreign imports would stir voters, he told the Los Angeles Times on February 16, 1986, that "Democrats will fight for American jobs and American pride, not some philosophical free-trade fantasy."

In defense of interest groups, entitlements and trade protections, Coelho became something of a cynical player. During the 1982 campaign, he exulted to The New York Times, "The whole issue of the fear factor is breaking our way!" Then, when things broke badly, he lamented to the Times that "generally positive feelings about the economy have negated our ability to develop an emotional issue" around economic distress. When Reagan's foreign policy escapades in Lebanon showed signs of becoming an issue in the 1986 elections, Coelho worried in Newsweek: "For all we know, he could pull the troops out and become the peace candidate." When Reagan was shot in 1981, Coelho's first reaction was this outburst of humaneness: "This means an extension of the honeymoon by three to five months.... There is no way Democrats can attack Reagan at all" during his recuperation. Asked why the Democrats opposed Reagan's involvement in Nicaragua, Coelho confessed, "When we play the Vietnam card, we win." Asked why he was attacking Reagan's fiscal loopiness, he replied: "When we talk about mortgaging the future of your kids--that sells." He also insisted that his party should keep pressing the ethical misconduct issue in the Reagan administration: "This is an issue that will work well for us."

Not entirely. It turned out that Coelho had a few ethical problems of his own. He had burnished his lifestyle considerably upon being elected to Congress, accepting approximately $80,000 per year in honoraria and speaking fees. Coelho used the money to make extensive renovations to his Alexandria home, which he proudly referred to as "the house honoraria built." "I'm earning more money than I ever dreamed of making," he gloated to the Los Angeles Times in 1988. Friends would later speculate that Coelho's ethical troubles stemmed from simply spending too much time cadging contributions from fat cats. He was slowly coming to resemble his marks.

His luck turned in 1989. First came the embarrassing discovery that an embattled s&l, Vernon Savings & Loan of Texas, had furnished him free use of its yacht and private plane while the thrift was being plundered by its owners. After his trips and parties were discovered, Coelho admitted he was wrong to use the yacht and jet, and remitted $48,450 for their use. But no sooner had he put that scandal behind him than he became entangled in an entertaining series of explanations over who did what for him regarding a purchase of $100,000 in junk bonds. A savings and loan executive, Thomas Spiegel--boss of the high-flying Columbia Savings and Loan Association in Beverly Hills and a protege of Michael Milken--purchased and held $100,000 in junk bonds for Coelho while Coelho was arranging the financing to purchase the bonds himself. Coelho later repaid Spiegel with money borrowed from Spiegel's s&l, Columbia Savings. During the time this bond purchase was taking place, Coelho arranged a meeting for a Columbia lobbyist with a member of the House Banking Committee to discuss issues of interest to Spiegel. Coelho got into trouble when he failed to disclose the $50,000 loan as required by law.

Disclosure tumbled on disclosure. It turned out that Spiegel was a member of Coelho's infamous Speaker's Club and a major contributor to his campaign committee. It also turned out that the junk bond Spiegel helped Coelho obtain--an investment in BCI Holdings Inc.--was a wildly oversubscribed Drexel offering available only to regular Drexel clients and institutional investors. The bonds were such hot items on the offering date that many of Drexel's regular clients couldn't get hold of one. But Milken friend Spiegel recommended it to Coelho, and when he didn't have the cash to purchase it, Spiegel bought it for him. The feds decided to investigate. Like any good businessman, Coelho knew when to get out. He quit the House.

In a sense, Coelho's rehabilitation began the day he resigned. "It was quintessential Coelho," says Fred Hatfield, his former chief of staff. "See the problem. See what's going to happen. Get out of the way. The whole episode was on and off the map so quickly because of how he, on a personal level, dealt with it." Coelho scripted his exit. "He and I walked out of the office together the Wednesday before his decision to resign," recalls David Dreyer, his press secretary at the time. "And he was reviewing with me the scope and variety of press questions I had gotten since he last checked in with me.... He was being examined by the political proctologists across the country.... He asked me at the time if I thought it would ever come to an end. And I said, no, the stories would never stop. The drip-drip- drip will continue. And he just kind of blinked his eyes as if the comment had registered on his computer. And he went out the door and got into his car and went home. Two days later he buzzed me and said: `I'm resigning, and I'd like to tell you how I think we should get the news out.' And he and I conspired to bring Mike Oreskes and Robin Toner up to the office and give them a little scoop for their Saturday paper."

An important part of Coelho's artistry was his sincerity. He couldn't conceive of the possibility of his own corruption. So when he resigned, it almost seemed as if it were a noble undertaking. "I know I will be cleared," he told the Times. "But at what cost to me? At what cost to my party? At what cost to my causes?... I will not be the vehicle to do damage to those institutions and the causes I hold dearly. The cause of epilepsy is my primary concern ... and I feel very strongly about it. I strongly believe that those who are less fortunate need to be represented and I try to do that. I, however, don't think that under the current circumstances I can devote my time to those causes and concerns that I believe so strongly in." He had turned scandal into a growth experience.

Amazingly, the Times bought it. "primary concern: epilepsy," read a subhead. "tremendous amount of inner peace." Other tributes followed. "The sense of power and decisiveness that surrounded Tony Coelho's political life was never more apparent than when he departed it," breathed Time. Newsweek's Conventional Wisdom watch awarded him an up arrow: "old C.W.--King of the PAC shakedowns. new C.W.-- martyr to the cause of decency."

The true reason for his felicitous exit, of course, was more complicated. "He wanted to move on," says a close Coelho friend. "He was broke financially. He did not have ten cents to rub together. He had two girls getting ready to go to college, and financially, he couldn't make it. The only way he would have stayed is if he thought within a very short time he could have been speaker.... He figured it would be eight more years, at least. So he pretty much knew he wasn't going to run again unless something dynamic happened. He said, forget it. I'll get out now while I'm still on top. Then the bond thing moved his timetable up. He said, what the heck. I'm going to go out and make money."

After his resignation, Coelho surpassed himself. At the 1988 Democratic Convention, he had thundered, "When the titans of Wall Street were looting the small investors on Main Street, where was George Bush?" Coelho pledged that his party would fight "the corporate cannibals on Wall Street." So what did he do after leaving the Hill? He became a cannibal on Wall Street. He joined Wertheim Schroeder. "The president of this bank decided after reading Honest Graft that he wanted me to come to work here," says Coelho, without smiling. "Yes, there are some criticisms.... But the book also says I'm very strong, that I go for the bottom line and make things happen. And that's what you need in an investment bank.... What he found in Honest Graft that he was most excited about was not just that I would ask for money, but that I had managerial skills. And my work here has made me very successful. I can't complain." Neither can Wertheim Schroeder. "Two billion, $3 billion, $4 billion," exults Dan Levitan, one of the bank's managing directors. "There have been so many landmarks with Tony."

Coelho's relocation to New York has been a linchpin of his return to grace. "You can count on one hand the people who've left the game and been successful," marvels Representative Robert Matsui. "He's majority whip one day. The next day, he starts all over in a whole new industry." Says former dnc Chair Charles Manatt, now a Washington lobbyist, "He's a very classy man.... He went to Wall Street and made his way in a completely different trade and business." Manatt pauses. "He's gotten away. That's what people respect."

But Coelho didn't quite "get away." When he went to Wall Street, a certain amount of Washington went with him. "Tony arrived with no background whatsoever in the asset management business," recalls Wertheim Schroeder Equities Director Bud Morton. "But he did have what seemed to be a great Rolodex." He was put in charge of the Wertheim division that invests in stocks and bonds for pension funds. Most pension fund money belongs to unions, where Coelho already had contacts. He promptly set about converting old political cronies into clients. "Because he's worked with people in political campaigns, and knows them through friendships and political situations, that has created with Tony a certain--opening," says Wertheim's Levitan. "That leads to a discussion of how we can be helpful.... There have been many occasions when he got us in the door when we would not otherwise have done so." Says Barbara Easterling of the Communications Workers of America, one of Coelho's recruits, "The labor movement admires him greatly.... We wanted to give him an opportunity to show us what he could do for us at Wertheim Schroeder." Jay Mazur, president of the Ladies' Garment Workers Union, agrees: "Tony Coelho has basically transferred his extraordinary contacts and ability and reputation to a new format.... If a guy was a prick in Congress, chances are he'll be a prick now. Tony Coelho was someone whom we could count on to give us a fair shake. He didn't sell horse shit and say it was chocolate ice cream. He was a person of integrity, a person who produced what he said he would produce. And best of all, he was available." When Coelho arrived at Wertheim Schroeder, the run-down division had about $700 million under management and was dwindling rapidly. In four years under Coelho, that figure has quintupled to about $4.2 billion and is heading toward his goal of $5 billion.

By 1993 Coelho's old friends were also back in power in Washington. In early 1994, Clinton offered Coelho the chief of staff job, but Coelho rejected it. When Panetta, a longtime Coelho buddy (the two men served in the same California congressional delegation and were in each other's wedding), came onto the scene, he offered him the chairmanship of the DNC. Coelho turned that down, too. He preferred a more informal arrangement. "Chief of staff would have been too quick an entry, too high-profile an office," given his ethics problems, says a friend. "They would have just blistered him."

Then the situation got desperate. "The White House, as you know, was obviously besieged by a lot of problems," says McAuliffe. "They needed somebody more focused ... especially with the first rumblings of the Senate possibly turning over." They also wanted a sound-biter. For months, there had been grumblings on Capitol Hill about the on-air flailings of then-DNC Chair David Wilhelm. Coelho was brought in to balance him. In the panic, Coelho's record was seemingly erased. No one seemed to remember that when presidential candidate Bill Clinton ran ads attacking congressional privileges and "pay raises in Washington," Coelho had called it "a cheap shot" that reflected a "Jimmy Carter-type attitude." No one seemed to remember how in November 1992, Coelho had opined in National Journal: "If Clinton worries about the revolving door, he won't be successful. If Clinton gets bogged down in symbols and minutiae, then he will have big problems." The politics of change had been trumped by the politics of incumbency.

Coelho's cynical tactics seemed unchanged from the 1980s. "Ideas," he happily informed Michael Kelly of The New Yorker, "are not the issue." Candidates such as Ted Kennedy, he mused to Newsday, "can't get re-elected if they run on who they are and what they stand for," and ought to "go at it with negative ads." On October 29 he repeated to Larry King that "the only way you can win races today is with negative advertising." Tactically, however, Coelho had his blunders. "He did one of the Sperling breakfasts during the campaign," laments one campaign consultant, "in which he said that the speaker has to go negative and attack Nethercutt. Foley was a client of ours. That day, he was asked in a press conference, `Are you going to follow the advice of the dnc and run a negative campaign?' And of course he said, `No no, I'm not going to run a negative campaign.' Well, that happened to be the day our negative ads were supposed to start. It was just one more hassle that had to be dealt with." Joel Hyatt's Ohio Senate campaign also got steamed at Coelho. "On just the day we were trying to circulate the spin that we were moving forward, Tony was quoted in the press as saying it may be too late for Hyatt," fumes a top campaign staffer. "We had a poll showing that Hyatt was starting to move. But when we tried to circulate, the press jumped on us, saying, `You say you're moving, but the top dnc person says it's too late.'"

Strategically, Coelho's mistakes were graver. On October 13 he predicted that the Republicans' Contract with America would backfire; he called it "our big break ... a gift from Heaven.... I think we can win on it." He cast the contract as a retread of Reaganism. "People immediately understand what Reaganomics means," he said. "Tax cuts for the wealthy ... and cuts in programs for seniors and veterans. It doesn't take any coaching." Later, he added: "It's a choice of what you want for the future. Tax cuts for the wealthy or fair tax treatment? Medicare cuts? Veterans cuts?"

Veterans cuts?! Coelho also took to the airwaves to defend farm subsidies, fastening on a loose quote of Bill Kristol's that said farm programs might be cut. "That was a rather interesting revelation!" he declared on CNN. "What that means is they want survival of the fittest in agriculture--and family farmers beware." On September 31 he vowed: "We will have Democrats all across the country talking about the cuts in Medicare." A day later he added: "They want to eliminate Social Security and Medicaid!" In the fall of 1994, in other words, Coelho believed the Democrats would win as the party of entitlements.

Obviously, no Democrat emerged from this election looking like a rocket scientist. But Coelho's failure was almost comically great. He defends the decision to turn the elections into a showdown between Clintonism and Reaganism. "We did not have an attack in regards to the economy going in, and we in fact developed one." He also defends the decision to champion entitlements. "I take the view that there have to be some programs that are critical to people we represent, that we have to stand on the rock for. Social Security. Medicare. The disability movement." Coelho's limpid brown eyes are fogging over. "When I was in Congress, I fought for the family farm. I just feel there is something about the American farmer, and that we need to preserve that way of life and help and assist those people." I ask for his views on deficit reduction. "I don't think it's something we should die on the sword on," he reflects. He prefers the theme of economic insecurity: "Those were the things we believed in the '80s would bring us back. And they did.... We made Social Security a major issue in '81 and '82, and in '85 and '86. And we were able to pick up House seats as a result of that." Republicans, he says, "have learned their lesson on Social Security. We whupped them on it. That's the type of thing we need to do as a party. Define ourselves...." Coelho's voice trails off. For a moment, he looks like even he knows the truth, which is that he has presided over a political fiasco of historic proportions.

What happened? Coelho has an answer. "I haven't seen this written anywhere," he muses. "I think the Reagan announcement on Friday [that he has Alzheimer's] is basically what did it. We were scoring on Reaganomics. But we were being very careful not to attack Reagan the man. Our polling showed the numbers were moving with us. But when he announced he had Alzheimer's ... it was all over the evening news. And the country reacted. All of a sudden, sympathy set in for the guy. I think it really stopped us. I don't know what else could have happened."

In any event, Coelho is already looking forward. His defenders say that since the conditional arrangement at the White House worked so well, there's now nothing he can't do. "From Tony's perspective," says Tom Nides, "he walked through the fire and did not get blown up.... He can now be involved as much as he wants to be involved. It's his personal prerogative. If you want to call it rehabilitated, he's rehabilitated." Martin Franks agrees: "Slowly but surely, the cloud is being dispelled."

What does this mean for Coelho's future in the West Wing? "I think Tony will have two key roles going into 1996," says former Representative Dennis Eckart, one of Coelho's best friends. "The first will be helping Democrats in Congress.... The outcome of the election puts Tony in a situation where if Dick Gephardt says, `Tony, you have spare time, you owe it to me,' Tony can't say no. So a lot of disposable time is going to end up being spent on behalf of his former colleagues. Second," Eckart continues, "without a doubt, he will have a key role in the re-election campaign. And I say that with certitude." Rahm Emanuel agrees: "We look to him for strategic thinking and coordination. Recognizing a problem; putting a plan in place. He's someone who works late nights making sure the party has a future and survives in a strategic and tactical way. I am constantly on the phone with him. Leon is constantly on the phone with him. Seeking advice, seeking background."

Coelho remains happy to help. "I like to have fifteen balls in the air at once," he says. "The White House. My work at the bank. My corporate boards. This bank doesn't lobby. It doesn't get involved in politics. So it's really just a question of time management." Coelho is sitting pretty: as an "unpaid, temporary volunteer," he has authority but no responsibility. He's not technically culpable for anything. "I was only there for what, seventy days?" he says.

There is one way in which Coelho really does serve the Democratic Party. His presence in its councils of power provides a test of its willingness to take the election results seriously. Coelho's influence is as good a sign as any of Clinton's commitment to change: the more Coelho, the less change. Nobody represents the Democratic past, and the Washington status quo, as clearly as Coelho. Clinton can make as many statements as he wants--a middle-class tax cut here, an agency abolition there--but as long as Coelho matters to him, you can count on business as usual.

Meanwhile, Coelho's on a roll. Wertheim Schroeder is particularly thrilled by his rehabilitation. Dan Levitan gives an example of how Coelho's connections work subtly to help business. "I do a lot of work with the CEO of Starbucks," he says. "One day, I thought, Wouldn't it be great if the White House drank Starbucks? That would really get out the message that quality and value are what Starbucks are all about. Well, the next thing you know, the health care task force is calling the CEO of Starbucks, wanting to know about our extraordinary benefits plan. Next thing you know, the CEO of Starbucks is being called to Washington for a meeting with the president. He goes into the Oval Office. The president is sitting there. The president has a Starbucks mug! The president takes him into the White House kitchen. And there's a big bag of Starbucks by the coffee machine! It just blew him away."

"This," says Levitan, "was all as a result of my calling up Tony and saying, you know, this would be helpful to us. It's vintage Coelho. It's a win for the president, because it's a way for him to meet companies like Starbucks who are doing things synonymous with what he's trying to accomplish. It's a win for Starbucks, because it gives it visibility in Washington. And obviously, it's a win for Wertheim. What does Tony get out of that except everyone's admiration?"