GEORGE SHULTZ outdid himself at the Iran-contra hearings. The stolid secretary of state was by far the most dramatic witness yet to appear before the panel, and his sensational story had the added interest of being true.

He made the members feel better. It was visible on their faces. They had been feeling like fools. Previous Reagan administration witnesses had told them, with obvious relish, that Congress had been conned and mugged and lied to for good and patriotic reasons.

Shultz, that figure of impassive sobriety, told them they were not alone. "You think you had it tough," he seemed to be saying. "What about me? I was supposed to be secretary of state."

On the whole, the members like Shultz. The hard right suspects him of creeping liberalism because he talks occasionally of making accommodations, or at least arms-control accords, with the Soviets. The left deplores his sometimes strident advocacy of the contra cause.

But after Oliver North and John Poindexter, he was a day at the beach. Unlike the uniformed bravos of the National Security Council, Shultz has heard of the Constitution and accepts the notion of a three-branch government. He does not quarrel with the right of Congress to exist.

North told the committees he wouldn't tell Congress its coat was on fire. Poindexter took them into his world where the demons are the likes of Tip O'Neill and Eddie Boland, who sinned against the Republic by trying to foil Reagan's plans for the contras.

The stoic secretary has some showman in him, it turns out. He strode into the hearing room and sat down at the witness table alone. The absence of a shouting lawyer in the Brendan Sullivan-Richard Beckler mode was in itself a promise that after 10 weeks of smokescreens and pipesmoke, a measure of rationality was at hand. The secretary was sunburned, and his face was to turn a deep crimson, sometimes from embarrassment and sometimes from anger that so few had understood his decision to stay at his post despite the humiliations, backstabbings and black lies he endured.

Life with Robert McFarlane, Poindexter and North, as he described it was like trying to stay alive in a crocodile pool. "It was a battle royal," the secretary said. CIA Director William J. Casey was on the other side. Once, when Shultz thought he had Casey in place on a comparatively sensible approach to the Iranians, Casey slipped in to see the president and got it reversed.

Shultz read about the Iranian arms shipments in the newpapers, just like Congress and the rest of us. He told the committee that he thought the idea was "illegal and unwise." He told that to a White House gathering the very day the president had signed a "finding," an authorization for the sales. Nobody told him.

"I would hardly have said it was illegal," he said dryly, "if I had known that the attorney general had provided a proper legal basis for proceeding."

Shultz had to get his information from the Foreign Service, which seems to have functioned rather effectively during the occupation. Our ambassador to Great Britain, Charles Price, picked up the news about the arms sale. But when Shultz confronted Poindexter with the story, Poindexter told him, "We are not dealing with these people. This is not our deal . . . . There is only a smidgeon of truth in it."

Our man in Tel Aviv, Ambassador Sam Lewis, picked up the tracks of Michael Ledeen, the shadowy NSC consultant who was whispering to the Israelis on the arms deal. Shultz asked McFarlane, then the national security adviser, what it was all about. McFarlane said Ledeen was there "on his own hook." But Ledeen told Lewis that he was on official business, and Lewis told Shultz.

Why did he stay on? Why, especially when the the story was out, and his opposition became known and the right fell on him for being "disloyal to the president."

Shultz' voice rose and shook with emotion when he told of those days of turmoil. "People were calling on me to resign, people who have held high office and should know that there was more involved."

The "more involved" obviously, was his feeling that someone in a white coat had to be in the disturbed ward of the NSC. If he had resigned, Reagan might have had to fire Poindexter and North. But Reagan would have remained. And Shultz obviously thinks that Ronald Reagan has to be carefully monitored, to be shielded against his own worst instincts and his evil companions.

The hearings have been saved by an unlikely redeemer. It is the stoic loyalist who has revealed the lower depths of the deception and folly that make up the Iran-contra scandal. Some people serve their country best by resigning. That's Elliot Richardson. Others apparently have to hang in and tell their story at a moment when they have no other choice. That's George Shultz.

Mary McGrory is a Washington Post columnist.