FOR THREE and a half years, Paul Volcker, the chairman of the Federal Reserve Board, has served this country with immense skill and steady nerve. His term expires in August, and there is talk at the White House of replacing him then. President Reagan is said to be inclined to appoint a candidate of his own. That's fair enough. But a change of chairmen usually means a change of policy. Precisely what sort of a change, and what sort of a chairman, does the administration want?
The list of possible candidates is not a long one. The nominee needs to be a person of high standing in Washington and in the financial world. The next chairman will need to be as astute as the present one in dealing with Congress, for much of the country's economic policy is now being made there.
That new chairman will need to know a good deal about the technical side of central banking and the international money system. This is unusually important at present, for the Treasury Department has less international expertise and experience at the top levels in this administration than at any previous time in memory.
The only Reagan appointee on the Federal Reserve Board is its vice chairman, Preston Martin. It is no derogation of Mr. Martin to say that his qualifications do not self-evidently seem to be those required for the chairman's job. His previous career was in the savings and loan industry. There are prominent Republicans who are equipped for the chairmanship, but most of them support Mr. Volcker's present policies.
It is quite true that in the Volcker years the Federal Reserve has risen to great political prominence. But that isn't Mr. Volcker's doing. It is the result of Mr. Reagan's failed economic strategy, and the budget deficits.
Very large deficits necessarily expand the political role of the central bank. It has happened in several European countries in recent years, notably Germany, and it has happened here. It is fair to say that far too much political responsibility has been pushed onto the Federal Reserve by the elected officials who ought to be carrying it. By refusing to deal with the consequences of its deficits, the Reagan administration has forced on the Federal Reserve decisions that far transcend the normal reach of an independent appointive agency. It has left to the Federal Reserve the terrible choices between inflation and unemployment. Under Mr. Volcker, the Federal Reserve has brought the inflation rate close to zero. The cost in unemployment has been substantial, but the signs of economic recovery are now appearing.
If Mr. Reagan thinks the Federal Reserve ought to follow a different course, he would do well to be explicit. If he does not want it to follow a different course, he might usefully reconsider the wisdom of replacing the chairman.