The White House is expected to name Manuel H. Johnson, assistant secretary of the Treasury for economic policy, to fill an upcoming vacancy on the Federal Reserve Board, administration sources confirmed last night.
Johnson, a supply-sider who is likely to favor expanding the monetary supply to stimulate economic growth, would be named to a full 14-year term on the board to fill the seat vacated by Fed Gov. Charles Partee when his term expires Jan. 31.
Administration sources told The Post last night that the White House has approved Johnson's appointment to the Fed but is withholding the announcement until a candidate is chosen to fill the seat vacated in August when Lyle Gramley resigned.
The White House wants to announce both appointments at the same time, sources said.
Both Gramley and Partee are Democrats. Johnson, a Republican, left a teaching position at George Mason University early in the first Reagan administration to work as a deputy to staunch supply-sider Paul Craig Roberts, who was assistant Treasury secretary for economic policy at the time.
Johnson is known for directing the preparation of a controversial Treasury Department paper that formed the basis of the administration's theory that high federal budget deficits are not directly linked to high interest rates.
Gramley, who resigned at the end of August to become chief economist for the Mortgage Bankers Association of America, was a senior Fed staff member before being named to the Council of Economic Advisers during the Carter administration. Gramley was appointed to the Fed Board in 1980 and became more and more concerned with controlling inflation.
Gramley's resignation could be considered a loss to majority control by Fed Chairman Paul A. Volcker.
However, Gramley dissented more from the majority position than any other member of the Fed in the last year. All of his dissents were in the direction of tighter monetary policy.
Volcker is known to be against appointing doctrinaire economists such as Johnson to the Fed because of concerns that their advocacy of using money supply to encourage economic expansion ignores the risks of rekindling inflation.
Staunch monetarists, by contrast, support a tight monetary policy that would curb inflation even at the risk of high interest rates.
However, Johnson would be only one of 12 voting members on the Federal Open Market Committee, the Fed's policy making group, observers noted, and it is unclear how his supply-side views would translate to the day-to-day operation of the Federal Reserve.
Congressional sources said that despite the move to appoint Johnson to the Fed, the White House does not appear likely to force Volcker to resign before his chairmanship expires in August 1987 by stacking the board against him.
After the supply-siders are satisfied, "Volcker will get someone he is comfortable with and the monetarists will be frozen out," a knowledgeable banking source told Reuters news service.
One frequently mentioned candidate for the Gramley vacancy was Wayne Angell, a Kansas farmer and banker who also is a director of the Kansas City Federal Reserve Bank. Angell had the support of Senate Majority Leader Robert J. Dole.