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Wall Street Journal - What Leadership Looks Like

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Location: Washington, DC

Wall Street Journal - What Leadership Looks Like

Voting for what's right, not what's safe.

If political leadership is hard to come by in Washington, it's because it invites political retribution. Just ask Republican Rep. Paul Ryan.

Mr. Ryan, perhaps the free market's truest friend in Congress, earlier this week voted to help rescue that free market. He hated the Paulson plan, but hated more the economic crash he is convinced will follow inaction. And in casting his "yes" vote on Monday, he knew what was coming: "The easiest thing would be to vote no and go hide in my office and watch the markets collapse. I will suffer politically for this, but I will sleep at night."

He was right. For his sin of acting to forestall economic mayhem, Mr. Ryan is being pilloried in Wisconsin, where he's in a competitive race. He's been accused of abandoning his conservative principles, of "caving" and "bailing out" Wall Street. He received 3,000 calls last week and wryly notes the "only one in favor came from Hank Paulson."

House Republicans spent this week justifying their positions on the failed bill, invoking taxpayers or credit markets or electoral pressures. Here's a better way to analyze votes: There were a few conservatives who for years took unpopular positions against the government-inspired credit mania, yet this week had the guts to act to calm the markets. And there were many Republicans who for years aided and abetted Fannie Mae and Freddie Mac, yet this week ran for political cover.

Mr. Ryan is among the former. As early as 2000 he was warning in House hearings that Fan and Fred were rushing into subprime loans and mortgage-backed securities, growing and concentrating their risk, and putting taxpayers on the hook. He's so vociferously called for more supervision that he was once stalked by a Fannie Mae lobbyist.

In 2002 he co-sponsored legislation that would have put these beasts under SEC accounting standards. Fan and Fred, and their congressional enablers, killed it in committee. In 2005 he signed on to a bill that would have subjected the giants to modest reform. The Fan-Fred alliance speared it in the Senate.

In 2007, Mr. Ryan opposed a proposal by Texas Republican Randy Neugebauer to gut systemic risk protections for the duo. It passed 383 to 36, with 162 Republicans voting for the companies. Many were the same members who this week thought it too politically risky to stabilize a market rocked by the very Fan-Fred privileges they granted.

The congressman was no fan of Mr. Paulson's plan, and initially rallied conservatives around a rival approach. When it became clear that the administration's approach was the only thing going, he spearheaded negotiations to rid it of its worst liberal elements and to include more taxpayer protections.

As credit spreads widened, he said he also realized this was a "Herbert Hoover moment, where he sat by and let a Wall Street crash turn into a Great Depression . . . There are times when free-markets stop and rational thinking goes out the window. It then isn't enough to be a laissez-faire conservative and let Rome burn . . . This bill is not perfect, but doing nothing is far worse than passing this bill."

Compare this to Mr. Ryan's GOP colleagues in Wisconsin. Jim Sensenbrenner and Tom Petri were among those 162 Republicans that let Fan and Fred bust the bank. Yet when this week's day of reckoning came, Mr. Petri complained it was a "half-baked plan," while Mr. Sensenbrenner declared he wouldn't "subsidize Wall Street." Oh, for this righteousness during the half-baked Fan-Fred subsidy days. And this from two guys in safe seats.

This has left Mr. Ryan alone to defend his position back home. It hasn't helped that his colleagues are spinning this as bravery, crowing that it was they who listened to constituents and they who acted on free-market principles. Never mind that these principles were nowhere in evidence back when it mattered. And never mind that should America crash, it will be the free market offered up as sacrifice to the regulatory mob.

It also hasn't helped that John McCain came out blaming this on Wall Street's "casino culture." Having initially placed this at the foot of the business community -- rather than at the foot of a political class that encouraged corporate excess -- Republicans fed into the left's line that this is a "bailout" of greedy executives. This has left grown-ups like Mr. Ryan struggling to explain the need to stabilize the financial system overall, and to protect Main Street from shedding its own blood.

Mr. Ryan is now busy sending out charts of Libor spreads to radio talk-show hosts (no joke), intent on explaining the seriousness of the crisis, and hopeful his credibility will see him through. "The best outcome is that [those of us who voted yes] take a political hit but avert a crisis," he says. How's that for leadership?

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