Once again, White House Chief of Staff Donald T. Regan is at the epicenter of a major Washington controversy. This one involves the effort of Paul Volcker's Federal Reserve Board to curb the ongoing epidemic of corporate mergers and takeovers, many of them "hostile," unwanted by the company gobbled up.

The Fed moved into the fray early last month, voting to curb use of so-called "junk bonds" -- high-yielding but low-rated securities -- as payment for going businesses. In essence, those trying to swallow up other companies in this manner would be required to put up 50 percent of the price in cash or other real assets.

This might bring some sanity into the takeover boom that in 1985 alone involved about $75 billion in mergers of companies worth $1 billion or more each. But the vote was a squeaky-tight 3-2, with one member, Henry Wallich, then out ill and one vacancy on the seven-member board.

According to some business leaders, Regan, former head of the Wall Street firm of Merrill Lynch & Co. and a bitter opponent of Volcker, orchestrated an administration-wide blast after the 3-2 vote, as part of his effort to get Volcker out of Washington.

A Regan aide vigorously denies the charge, asserting that the challenge to Volcker originated in the Treasury Department, "and never came up to Regan." But he acknowledged that the rationale for opposing the Fed's move was rooted in the Regan-Beryl Sprinkel ideological distaste for doing anything to "interfere" with free markets.

Wherever the truth lies, recent events amount to an assault on Volcker, the outcome of which is not yet clear. Two new Reagan appointees to Fed governorships are expected generally to oppose Volcker's leadership. When both are aboard, the 3-2 vote to limit junk bonds in takeovers could be reversed.

As investment banker Felix Rohatyn (who played a crucial role in the recent $6.3 billion GE-RCA merger) said in an interview: "Here is Volcker, standing with his finger in the dike of Third World debt, the only major figure in this country who commands the respect of the international financial community, and they (the administration) are trying to make him ineffectual! If we sacrifice Paul Volcker for the junk- bond mania, we will clearly show the world that we've lost any sense of financial responsibility."

The typical takeover scam that the Fed wants to limit involves a "shell" company, with limited assets, which buys up the stock of the target company, getting the money it needs by selling "junk bonds." These low-rated bonds are secured by the stock being acquired, and pay whopping interest rates, say 4 to 5 percentage points above going rates. In a serious rion, many of these bonds might prove of little or no value.

Compounding the evil, some of the best customers for junk bonds are savings and loan institutions (already loaded with poor investments), weak insurance companies, and pension funds.

The Reagan administration's angry response to what in reality is a very mild rule, designed to prevent corporate America from going bust, is nothing short of astonishing. The two dissenters on the board, Reagan appointees Preston Martin and Martha Seger, argued that the proposal would be ineffective, because financial markets would find ways of circumventing the proposal.

But the Martin-Seger-administration objection is ideological, not technical. If the Fed (which holds a public hearing on its proposal next week) prevails, Martin argues that it will be the beginning of "the Fed sitting in judgment of mergers and acquisitions." But if not the Fed, who?

Rohatyn played a key role in the GE-RCA merger, and certainly can't be accused of being philosophically opposed to corporate consolidation. But he is worried about the way stock- market prices are being hyped (and insiders are profiting) by the spreading use of junk bonds.

Henry Kaufman of Salomon Bros., another major Wall Street house active in the merger business, told me that even if the market finds ways of circumventing the Fed's proposed limits, "the role of the regulators is to build a better mousetrap: the central bank can't just sit there and say nothing; there's no one else to blow a whistle."

Kaufman's point is that the Fed is trying to head off the ultimate problem: the possibility that corporate America will get so bloated with debt that failures will proliferate, and taxpayers will have to pick up the check.

Is that an interference with the free play of the market? Of course it is. One could say that the very establishment of monetary policy "interferes" with the market, Robert Hormats of Goldman Sachs observes. And it should.

But those who cry loudest against any rules on the use of junk bonds in takeovers also are the first to rescue large financial institutions, such as big banks. As treasury secretary in 1984, Donald Regan approved the rescue of the failing Continental Illinois Bank. He can't have it both ways: if the market is to be free for junk-bond financing, it has to be free to experience, as well, the ultimate failures.