THOMAS C. REED must be wondering what happened. It isn't easy to explain. The first story about the Securities and Exchange Commission's charge that he made an illegal "insider's" stock purchase appeared nearly 14 months ago (reporting also that Reed had settled out of court.) The story caused nary a ripple, and Reed's friend, Judge William P. Clark, went ahead and made Reed one of his two principal deputies on the National Security Council staff.

But the same stock options transaction has now prompted Sen. William Proxmire (D- Wis.) to call Reed "a thief" in a hearing last week. The Republican chairman of the Senate subcommittee that oversees the SEC, Sen. Alfonse D'Amato of New York, has said that "Reed's conduct was improper, illicit, at variance with the truth, and he tried to cover up . . ."

Reed -- who has said from the start that he did nothing wrong -- is still working as a consultant to President Reagan's commission on the MX missile. But the White House is distancing itself from him, and he'll be back in private life in less than a month. Last fall there was talk that he might succeed Clark as national security adviser; now he is leaving government service under a cloud.

Why this reversal in Reed's fortunes? Essentially because a West Point graduate and California racehorse breeder named Richard D. Rosenblatt wrote a letter to Archibald Cox, the chairman of Common Cause, who passed it on to Julie Kosterlitz, a young reporter for Common Cause magazine, who conducted an investigation and wrote an article about Reed that came to the attention of Bill Willson, a producer of CBS Television's 60 Minutes. Willson and correspondent Mike Wallace then pursued the story, discovered that Reed was still the subject of a federal criminal investigation, and broadcast a report to 60 Minutes' 40 million viewers. That was enough to sink Thomas Reed.

In effect, Reed was sitting on a political bomb with a long fuse -- so long he had reason to believe it had gone out. But Reed may have been headed for embarrassment or worse from the beginning. Though he had settled his problems with the SEC by giving up $427,000 -- the amount of profits from a transaction the commission called illegal in its civil complaint -- the Justice Department still had the authority to pursue a criminal investigation. Reed, Clark and whoever else was supporting them in the White House might have been able to hold off critics alarmed by the SEC case, but the very words "criminal grand jury investigation" have a different, more ominous ring.

But even apart from the criminal inquiry, Reed was at risk. He insisted on his innocence: "I was totally unwilling to sign a consent decree that implied I did anything wrong," Reed told Howard Kurtz of The Post in February 1982.

But the SEC enforcement division had already concluded that Reed's testimony on the key element of the disputed stock deal was "incredible," had said that he "has been known to alter documents to suit his own needs," had found that he backdated crucial documents and attempted "to vary the styles of writing so that it would not appear that they were filled out by the same person."

All these statements appeared in the SEC staff's "action memorandum" that recommended bringing suit against Reed. Though not made public, it was a document that could eventually be acquired by congressional investigators, as indeed it was.

Reed may have been reassured by the only public statement the SEC had made on his case, a civil complaint filed two days before Christmas of 1981 with the settlement in which Reed agreed to give up the $427,000. For reasons that still haven't been explained -- and that baffle members of the SEC's oversight committees in Congress -- the public complaint failed to mention Reed's backdating and signing others' names to documents. The complaint did detail the circumstantial evidence that led to the SEC staff's conclusion that Reed had received inside information from his father, a member of the board of Amax Corp.

Reed talked to his father just moments before calling his broker to buy the stock options, which were a long-shot gamble that Amax's stock would go way up in value in a matter of weeks. That's just what happened when a bid by Socal Corp. to take over Amax was announced just one day after Reed purchased the Amax options.

The story of Reed's $427,000 coup got into the financial press, apparently because the options dealers who took the loss leaked the story. (Some of them have suits pending against Reed.) The SEC then took up the case, leading to the complaint and settlement.

Now watch what happened in the media:

Right after the SEC settlement was filed in December 1981, brief stories appeared on business pages and in the financial press. Soon afterward someone at the SEC tipped a Post reporter, Phil Hilts, that the Reed settlement was worth looking into. That source sent Hilts a copy of the public documents, noting that in his opinion, Reed had received mild treatment. Another Post reporter interested in the settlement, Howie Kurtz, joined Hilts to work on a lengthy story about it that ran on Page 2 of The Post on Feb. 4, 1982.

It was a thorough account of what was then known about the Reed affair. It recounted the sequence of phone calls between Reed, his father and his broker, and quoted Reed as saying he had no inside information of the merger offer when he bought his options. The Post story had no apparent impact -- "there was absolutely no reaction, no calls, no letters, nothing," recalls Kurtz.

Why? For at least three reasons. First, it was on Page 2, which undoubtedly diminishes the impact of any story, particularly one of this kind. Second, it was written with what newspaper people call "a soft lead." Because the actual news of the Reed settlement had already been published, Hilts and Kurtz backed into their account by noting that Clark wanted Reed on his NSC team, "but he (Clark) is faced with a slight complication" -- Reed's troubles with the SEC. Third, Hilts and Kurtz had nothing about the SEC staff's finding that Reed had backdated documents and signed other peoples' signatures in an attempt -- the SEC staff thought -- to disguise his part in the stock deal.

For all these reasons, the story was less dramatic than later accounts would be. Ironically, the story also said that the Reagan White House "was testing the public reaction . . . by naming Reed as a 30-day consultant before deciding whether to tap him for a permanent . . . job." When there was no reaction, Reed was signed on for an indefinite period as Clark's right-hand man.

But one citizen did react -- a wealthy Californian named Richard Rosenblatt. Rosenblatt is a lifelong Democrat and former member of the Democratic National Committee who had voted for Ronald Reagan in 1980. He was also a substantial stockholder in Amax, and had hired lawyer Louis Nizer to investigate the plausibility of bringing suit to force the Amax directors to accept the Socal takeover bid that had pushed up the price of Amax stock, but which the directors had decided to reject. (Rosenblatt later dropped that idea and sold his Amax stock.)

When Rosenblatt read that Reed had been put on the White House staff in a sensitive position, he got angry. He wrote a letter to Judge Clark (whom he did not know personally) asserting that Reed's alleged "misuse of insider information for personal gain is offensive to all officers and directors of public companies, to all career military men and women, to all cadets and midshipmen of service academies and to all honorable citizens." (Rosenblatt graduated from West Point.)

Clark did not respond, but Rosenblatt stayed angry. He wrote another letter to Archibald Cox, the former Watergate special prosecutor who is now chairman of Common Cause (and whom Rosenblatt also did not know personally). Cox passed the letter to the Common Cause staff, which decided to launch an investigation. Julie Kosterlitz, 27, filed a request under the Freedom of Information Act for the SEC's documents in the case. This produced a lot of fresh information, including the facts that Reed had backdated and signed other peoples' names to documents in the stock-options deal.

(The names Reed signed were of people to whom he had decided to give the suddenly valuable stock options that he had bought for very little money. He has said that he never intended to profit personally from the transaction, always planning to give the proceeds to friends and business associates.)

The Common Cause article put the Reed affair before a wider audience, in part because The Post's Outlook section reprinted an edited version of it. But the article did not shake the White House view that Reed remained fit to serve President Reagan. Larry M. Speakes, Reagan's spokesman, insisted -- incorrectly, as it turned out, though he didn't know it -- that "all relevant factors concerning these activities were taken into consideration and thoroughly examined by the NSC staff before Reed was designated as a special assistant to the president."

The Common Cause article prompted Rosenblatt to write Clark again, asking for an answer to his original complaint about Reed. This time he got one -- from Richard C. Morris, longtime aide to Clark. Morris cavalierly informed Rosenblatt that "the charges (against Reed) were dismissed" by the SEC -- Morris's intepretation of the the consent agreement that required Reed to repay $427,000 and promise never to use inside information in the future. Morris also said that "an independent investigation by the NSC has failed to disclose any improper conduct by Mr. Reed."

As part of that "investigation," Morris had visited the SEC in June 1982 (four months after the first Post article) to inquire about the 1981 investigation of Reed. According to a memo by Susan Pecaro, an SEC official in the meeting, "the primary focus of Morris' inquiry was whether or not Reed lied when he denied possession of material non-public (i.e., "insider") information."

According to this memo, Theodore A. Levine of the enforcement division "refused to provide a direct response to that question." Instead Levine said that the enforcement staff had reached the "difficult" decision that the circumstantial evidence demonstrated that Reed engaged in insider trading. Judging by the memo, Morris didn't ask to see all the records, and Levine didn't volunteer them. Hence the damaging language in the SEC action memorandum that called Reed's explanation "incredible" apparently never reached the NSC.

Nor, apparently, did any ord of the Justice Department's delayed but continuing interest in Reed. Why the federal criminal investigation -- which began in 1981, and was renewed recently -- was delayed remains beclouded in bureaucratic mystery.

But we digress. The Common Cause article lay on the table, as it were, but to no effect until a month ago, when it came to the attention of Bill Willson of 60 Minutes. Willson and Mike Wallace had been looking for a way to do a piece about insider trading for more than a year. But Willson -- who lives in New York -- had missed the whole Reed episode. He saw a reference to it in a column on the New York Times financial page about a month ago, however, and asked around about it. He was told about the Common Cause article, read it, and came right to Washington to pursue it himself.

Willson got many of the relevant SEC documents. He found ready allies on the staff of the House oversight subcommittee which has jurisdiction over the SEC and which had already begun to look into the Reed matter as part of an inquiry. Subcommittee staff helped establish that Reed was the subject of a continuing criminal investigation. And Michael F. Barrett Jr. a former SEC attorney who is director of the subcommittee staff, agreed to go on camera to be interviewed by Wallace for 60 Minutes.

The item was broadcast on March 13. Two days later in The Washington Times, Jeremiah O'Leary, who worked briefly as Judge Clark's press secretary, reported that Reed would be leaving the NSC staff. Actually, 60 Minutes had not broken any new ground, but its story had been strong and well-focused, and had reached at least 40 million Americans. "Somehow, when we put it in a brighter spotlight, things begin to happen," said Don Hewitt, executive producer of 60 Minutes.

Better late than never.