As boss of Merrill Lynch, the biggest brokerage house in the country, Donald T. Regan was a big shot on Wall Street.But when Ronald Reagan made him Treasury secretary and his "chief economic spopkesman," it quickly became clear that Regan had two handicaps: He was a complete novice in Washington, and he was outside the tight inner circle of advisers close to the president.

As a matter of fact, some of the Reagan "loyalists" tried to upset the proposed appointment when it surfaced that Regan actually had made a contribution to Jimmy Carter's lat campaign. It may be one reason the Treasury's top staff was loaded with ideologues from supply-side and monetarist camps.

In the early weeks of the Reagan administration, Regan played second fiddle to Budget Director David Stockman, an ex-congressman with a missionary zeal for reducing the size of the federal government who has all the necessary Washington smarts. Stockman did a superb job of shepherding the president's $45 billion budget cut through Congress, making a reality of what had only been a Reagan campaign slogan. So while Regan struggled to learn the ropes, Stockman seemed to be calling all of the policy shots. And Stockman got all of the headlines.

But Regan, an engaging 62-year-old ex-Marine and gold enthusiast, is a fast learner. In the past six months he has moved closer to the inner circle than any other outsider. He has a defter touch with Congress and the press. But even more important, White House insiders say, the president has grown to like Regan and his easy, direct manner.

Regan has a fondness for golding analogies (he will "tee up," rather than bring up, an issue). He's bright, not stuffy, and has a sense of humor -- all of which appeals to Reagan. In short, the president has grown comfortable with Regan and trusts him. Regan, for his part, has learned how to brief the president -- an ability that still eludes another outsider, Secretary of State Alexander Haig.

Relaxed in his Treasury office, Regan confided:

"I would say that I know a lot more about the political process than I knew on Jan. 20. I think that I've had to curb my natural tendency to want to do things quickly and accomplish a lot in a short space of time because that simply is not do-able in the body politic.

"The essential lesson is that you have to check with everybody, particularly [congressional] committee chairmen, before you do anything. And make sure you get to know people, and be as helpful to them as you possibly can, on both sides of the aisle."

Regan will be at the president's side, along with Haig, at the Ottowa summit later this month, and will have a chance to improve on what is still a negative image of himself overseas. In part because he felt he had to stay home to help marshal the Kemp-Roth tax bill through Congress, Regan ducked out on two or three important foreign economic meetings overseas in the past six weeks. By default, Economic Council Chairman Murray Weidenbaum has been a more effective and regular channel of communication with European economic policy makers.

Regan also has suffered, from time to time, what White House aides deducted as poor staff work or inadequate Treasury briefings. For example, during the debate on Japan's "voluntary" auto quotas, Regan, on the free-trader side, brought in data that advocates of protection were able to challenge.

But as Regan gained confidence, relying on his own judgment and less on his staff, he has been more effective. Helping him win votes for the president's tax bill, he appeared to seize top billing as a presidential economic policy maker -- and the headlines from Stockman. As he points out, there is no longer a question whether there will be reductions in marginal tax rates -- the basic "supply side" princile of the Kemp-Roth bill. "The question now is just how many years of marginal tax rates we are going to have," he says with a note of pride in his own role.

On the other hand, Regan himself called attention to the fact that White House Chief of Staff James Baker is in charge or legislative tax strategy, a move he, as a team player, defends as "smart politics," explaining, "We need a united front. No one could call all the signals."

Regan's place in the pecking order, although far more secure than it was on Jan 20, is, of course, a far cry from the days at Merrill Lynch, when he could bark an order and be sure it would be carried out 100 percent. He chairs the powerful Cabinet Committee on Economic Policy, where consensus and comromise is the name of the game.

At 7:30 every Tuesday morning, he breakfasts at the Treasury with Stockman, Weidenbaum and president assistant Martin Anderson. They talk over economic policies, programs and issues. But Regan is merely the host, not the top banana. Other participants suggest that it's "a meeting of equals."

Perhaps significantly, Federal Reserve Chairman Paul Volcker now is joining the Breakfast at Treasury group on a regularly irregular basis. This smooths some feathers that were ruffled when Undersecretary Beryl Sprinkel felt free to give the Fed public advice on monetary policy. Voocker brought a complaint about Sprinkel directly to the president.

"In recent months," Regan said, "you've seen very little open comment by the Treasury about the Fed or vice versa. We have agreed that we will meet in private and talk about mutual problems, but without the benefit of headlines or name-callaing or things of that nature."

He seems a bit sensitive to the fact that some of the sharpest criticism of the Reagan economic-recovery program comes from his old backyard in Wall Street, which doesn't believe interest rates will come down unless the government does more to reduce bulging deficits. "The skeptics are the bond traders," Regan snapped. "You ask the chief executive officers, the heads of the Wall Street firms, whether they support our program, whether they think things are gonna be well, and they all say yes."

Regan professes full faith in the ultimate success of the Reaganomics "mix" of deregulation, supply-side tax strategy, traditional Republican budget-cutting and the monetarist approach to Federal Reserve policy that is at the root of the concern among the hard-pressed bond-traders.

For his part, Regan is willing (and thinks America's summit partners should also be willing) for interest rates to stay high (which means bonds stay depressed) "until it is recognized that we are in a recession, at which time the real rate of interest has to come down sharply [from its present level] of close to 6 points."

On the other hand, Regan preserves his individuality and a sense of independence. He added with a smile, "I do not and have not adorned myself with the title of 'monetarist." I think I'm more empirical, or practical, a man of finance rather than a theorist -- a financier in the true sense of the word."