Merrill Lynch & Co. Chairman Roger E. Birk knows how to walk a fine line.

He's clearly not completely satisfied with the way the Reagan administration has managed the nation's economy; on the other hand, his predecessor as head of the nation's largest brokerage firm, Treasury Secretary Donald Regan, is the president's top economic policy maker.

Asked about the short-term prospects for the economy, Birk carefully observes that "there are no signs of recovery, but there are some encouraging things," such as the decrease in financing charges for autos. "I think you may see signs in the November figures that the economy is turning," he said in a recent interview.

And here is his response when asked directly about the administration's track record: "The administration has all the sound principles on which one would base a program of recovery. But I believe there was some miscalculation on the extent to which the economy was weaker than appeared evident to some in the administration."

That's the delicate balancing skill that brought Birk, 52, up through the ranks at Merrill Lynch, where he started in 1954 as a margin clerk in Minneapolis. Through the years Birk has displayed, by all accounts, a quiet diligence and a far-sighted concern for the technology of the brokerage industry's back office.

His rise took him to the presidency of the company's brokerage subsidiary in 1974, and two years later to the job of president and chief operating officer of the parent holding company. When Regan announced he was going to Washington after the 1980 elections, there was little question that Birk would take over.

Two years later, Birk is not widely known outside the industry, which his company dominates with total capital of $1.2 billion -- the second largest, Salomon Brothers Inc., has capital of $719 million -- and 36,000 employes, three times as many as its nearest competitor. (Even on Wall Street his name sometimes draws a blank: "Is he a race car driver?" responds one top-level investment manager.)

But in an era when public relations and image building are stressed on Wall Street as brokerage houses step up their competition with institutions ranging from grocery stores to insurance companies, Birk is low-key and shows little interest in creating a public identity. His self-effacing style is in contrast to that of Regan, whose aggressive manner gave him high visibility.

"It may well be," said a competing brokerage executive, "that when Don Regan left, the firm opted intelligently for a leader who would systematically and without making any errors, put into to play the game plan that had been developed."

That's not to say that Birk has not made a number of vital decisions for Merrill Lynch. He has overseen the firm's product expansion, moved Merrill Lynch aggressively overseas, maintained the firm's cherished independence while mergermania ran ramapant on Wall Street, directly supervised a continuing upgrading of its back-office technology, and been, at times, an articulate spokesman for securities industry issues in Washington.

Nor have his prognostications been bad. He went out on a short limb last January and predicted the start of a bull market late in the summer or early in the fall.

"Considering the underlying values in equities and long-term promise of economic growth, the stock market should be in position for solid recovery later this year, and continuing for a couple of years--possibly doubling in value from its cyclical low," he told reporters at the time.

The realization of at least the general tenor of the prediction has been fortunate for Merrill Lynch, for like other brokerage houses it has benefited from the strong stock market, which has dramatically boosted its third-quarter profits and its own stock price.

While Merrill Lynch shares have jumped from a 52-week low of $21 a share to a high of more than $71, the firm reported its best sales and profits ever, with revenues for the quarter ended Sept. 25 hitting $1.3 billion and profits climbing to $100.3 million, triple those of the same period in 1981 and almost 50 percent above the previous quarter.

But perhaps the most notable Birk-led effort at Merrill Lynch was the May announcement that it had struck a startling deal with Fung King Hey, chairman of a major bank and securities firm in Hong Kong. In that massive transaction, Fung became the largest single stockholder in Merrill Lynch, with a potential 4 percent of its outstanding stock -- 1.7 million shares -- worth more than $110 million today.

In exchange, Fung sold a 25 percent interest in his large brokerage business and a separate 15 percent piece of his bank. "It's folly to think you can be in this business without a major international capability," Birk said, noting that between 15 percent and 20 percent of his firm's equity is overseas. "We are committed to being an international financial services firm."

That does not mean that Merrill Lynch is ready to abandon its historic independence and play the merger game that swept Bache Halsey Stuart Shields into Prudential, Shearson Loeb Rhoades into American Express, and Dean Witter Reynolds into Sears, Roebuck & Co. in recent years. Yet, Birk, with characteristic delicacy, won't rule out even that possibility.

"We have a commitment to independence and that policy gets reviewed periodically," he said with a chuckle.

Birk also has moved recently to put Merrill Lynch into the telecommunications business, thereby lessening its dependence on telephone companies and other suppliers that link its offices, including brokerage outlets. Merrill Lynch is a partner with the Port Authority of New York and New Jersey in "Teleport," a project on Staten Island that will be a site for satellite dishes and other communications facilities with a fiber optics link to Wall Street.

"We want to control our own communications activities," Birk said, pointing out that Merrill Lynch is among the nation's largest Bell System customers. "It is also a business opportunity that will enable others to do similar things."

In the competitive arena, Birk has expanded the reach of the Cash Management Account, which with 865,000 accounts and more than $50 billion in assets is the brokerage industry success story of recent years. The firm takes such pride in its innovation that it has had the investment process patented and has Wall Street bristling from its call for competing houses to pay license fees in order to operate their similar services.

"We developed the process, it is unique, and we received a patent," Birk insisted, though other firms challenge that position. "Those who want to use it ought to compensate us. We have to respond to protect our rights and we are very serious about it."

Nor is Merrill Lynch about to roll over while banks move quickly to offer their own flexible-rate money market funds, a move approved by federal regulators earlier this month. "Banks should have the same capabilities we have to offer money market funds. But they should be doing it under the same regulations. They're getting deregulated interest rates but an insurance subsidy," Birk said, referring to the fact that the bank accounts will be insured by the goverment, while brokerage accounts are not.

But Merrill Lynch has several competitive steps in mind, including the introduction Monday of U.S.A. Government Reserves, a fund which will have a fairly long maturity tied to government securities. "We'll have one or two other things," he added wryly.

The suggestion is clear that the diversification--begun by Regan--that has moved Merrill Lynch beyond the brokerage field into real estate and a host of other services is not over. But even though ready and eager to compete, Birk thinks it is time for the federal government to appoint a study commission to figure out how to monitor the patchwork of rapid changes in the financial industry.

"We have never asked for changes in laws to accomplish our mission, but I have serious concerns that the financial industry is evolving without anybody focusing on the whole picture," he said. "Why don't we take a little while and examine the issues?"

He believes that in five years what will emerge from the financial services revolution is a "more homogenized financial institution," and that Merrill Lynch "will be involved in any activities we need to be preeminent."