Yale is in the midst of picking a new president. And to hear the Old Blues talk one would think the fate of the free world hangs in the balance.

Everyone of course, is very hush-hush about who the new president might be. And Lord forbid anyone should say they'd really love to have the job. Or appear to be running for it - as more than a few people are.

But a quiet, undercover drama is slowly unfolding here that says a great deal about the state of higher education in the late 1970 drama pitting conflicting philosophies, economic, interests and power blocs during a campus retrenchment.

The faculty is worried about how the drama will end. So are the Old Blues - as Yale alumni are called. And more than a few movers and shakers in education circles around the country are concerned about just what kind of person Yale will pick to replace Kingman Brewster, one of the nation's most controversial and most publicized university spokesmen during the turbulent 1960s and early 1970s.

Will it be a low-key conservative willing to trim budgets as many older alumni would prefer? A trusty but colorless Old Blues, like Yale College Dean Horace Tafts, of "the" Ohio Tafts? A politician like Gerald Ford or William Scranton the former Pennsylvania governor? A young academic hotshot? Or heavens be, a woman like acting president and provost Hanna Gray?

The issue is complicated by a the dual nature of the job. Yale is a huge business with a $275 million annual budget, a $570 million endowment and 8,000 employes. But it is also elite educational institution a place of scholarship and intellectual ferment. Its president must be able to balance these dual - and often conflicting - interests relate to students, raise money to keep the place going and serve as a spokesman for the university educational philosophy.

Obviously, no one person can be expert in all these areas. So the choice boils down to what aspect to emphasize. Brewster was considered an extraordinary spokesman and charismatic figure on campus. Now, Yale appears to be learning more to a strong administrator to take his place.

That may be partly because the final decision is in the hands of the Yale Corp. the university's governing board and its version of the best and the brightest.

The corporation which includes two senators, one governor and Secretary of State Cyrus R. Vance among its members is going about its job with all the fare and secrecy that might surround the picking of a new Pope. Or a new football coach at Ohio State.

After Brewster was appointed ambassador to the Court of St. James last spring, Yale named a seven-member search committee chaired by one of its senior members, William P. Bundy, an assistant secretary of defense and state during the Kennedy-Johnson era. Since May, it has surveyed 1,600 alumni by mail, opened an office in New Haven, interviewed 200 persons on campus, and 100 education, foundation and corporate leaders around the country in what Bundy calls the most complete and "first truly national search" that Yale has made for a president.

Officially, the list of potential candidates has been trimmed from 400 to 70. Unofficially, the remaining realistic candidates could be put on a much smaller list which would number about 25, according to several sources. And if the corporation took a formal poll - which it hasn't - a list of less than 10 contenders probably would emerge.

The only hint anyone on campus has had of who these people might be is a list of five alleged contenders published in the Yale Daily News. But search committee members pooh-pooh the list as inaccurate an incomplete.

And one of those named on the list, A. Bartlett Giamatti a young English professor who writes on sports for Harper's magazine, declares: "The only thing I ever wanted to be president of was the American League."

The selection process and the secrecy around it has stirred an internal debate in the faculty and administration. "This must be the only selection committee at a major university in the last 10 years without students or faculty on it," complained one senior professor who asked not to be named. "The trouble with a committee like this is you don't have any responsible leaks."

"I think most of us are scared. We lack total confidence in the corporation," said Donald Kagan, a popular history professor. "I've never seen a search committee with less faculty involvement. It means we're all in the dark and our view isn't represented."

"Our worst fear is the decision won't be based on sound educational reasons," he added. "There's all this talk about money managers. We're afraid political and fundraising concerns will be paramount."

This concern is heightened by a general low state of morale among professors - especially young, untenured ones - around the country. "The faculty has been in a vocational crisis since the 1960s," said one profesor. "The Yale faculty has a sense it isn't doing something important anymore. There's a lack of sense of purpose about what you're dong and its value."

Part of the reason for the national interest in the selection of the 18th president of the 276-year-old institution was Kingman Brewster himself, he was a larger-than-life figure, who came to be viewed as a national spokesman for campus liberalism. He was president when they admitted women to Yale, the guy who led a student antiwar march in Washington and once said, "I am skeptical of the ability of black revoluntionaries to achieve a fair trial anywhere in the United States.

He inspired first loyalty then, in later years, awe among students. Jonathan Kaufman, editor of the Yale Daily News, recalls a roommate seeing him on campus and saying, "Oh, my God you're Kingman Brewster. The reaction wasn't an unusual one. After all, he'd been on the cover of Time and Newsweek. He was a celebrity."

When Brewster resigned, the student newspaper said he was "the best president Yale could have had for the tumultuous '60s," and it praised him for changing Yale "from an aristrocratic male institution dressed by J. Press and Brooks Brothers to a coeducational community whose jean-clad students are as varied as the courses if offers."

But, the paper editorialized. "It is still unclear what price Yale will pay for Brewster's leadership from 1970 to 1977. Brewster leaves Yale with a $3.5 million deficit, a failing Campaign for Yale (a $370 million fund-raising drive) and a still-suspicious alumni."

(It is hard to exaggerate the opposition Brewster created among some alumni. Thomas S. Tyler, for example claims that 55 clients of his Chicago law firm wrote Yale out of their wills to a tune of $19 million. Whe he was told over lunch last spring that Brewster was leaving. Tyler says, "I got up and said 'I'm going back to the office and write a check to Yale.' And I did.")

Whoever replaces Brewster will have to deal with these alumni and a time of retrenchment at Yale which, like other private universities, is feeling a severe financial pinch. It's a sign of the times that one of the most frequently heard comments here is. "The era of charisma is dead. What we need now is a manager."

Bundy says the corporation hopes to make final selection no later than Jan. 1. Meanwhile, there's no obvious front-runner for the job.

The most visible candidate is acting president Gray, a Renaissance history expert who has written on Machiavelli and was a dean at Northwestern University before Brewster brought her to Yale in 1974. Because of their positions, Yale College Dean Taft, grandson of a U.S. President and son of one of the century's best-known Republican senators, and Graduate School Dean Jaroslav Pelikan also must be considered contenders.

But each has liabilities. Gray's chief one, considering Yale's past, may be her sex. And then, too, neither she nor Taft although well regarded on campus, is a good public speaker.

Other candidates mentioned range from a half dozen young faculty members whom few people outside of New Haven have heard of to Swarthmore College President Theodore Friend, Assistant Secretary of State Richard Cooper former CIA Director George Bush and a dozen or more prominent Yale alumni.

Bundy and other search committee members are extremely tight-lipped on not only who their favorites are, but even what qualifications they are looking for. But like other Old Blues, whose hearts are filled with the legends of their school, they are clearly impressed with the gravity of their task.