White House chief of staff Donald T. Regan said yesterday that the administration wants Federal Reserve Chairman Paul A. Volcker to stay in his job through the end of his term in August 1987, and raised the possibility that he might be asked to serve another term.
In what appeared to be an effort to calm fears that there is serious discord in the nation's central bank, or wide policy disagreements between the Fed and the White House, Regan said that the views of Volcker and President Reagan on basic monetary issues are not "that far off."
Unless Volcker himself "is unhappy or in ill health, or gets an offer he can't refuse," Regan said, "I see no reason why he should step aside. And from the point of view of his own future, I think he has to be the one to make a lot of these decisions himself."
When the time comes to think about the next chairman of the Fed, around June 1987, Regan said, "We'll have to talk to Volcker about what does he want to do, et cetera, et cetera. I don't rule anything out. I would never commit to anything, particularly in the economic and monetary fields, 15 months in advance."
He also said it was unlikely that Economic Council Chairman Beryl Sprinkel -- a long-time Volcker critic -- would be moved into the Fed seat to be vacated next month by Vice Chairman Preston Martin, who resigned last week.
Regan insisted that recent turmoil at the Fed, which included the rare event of the chairman being out-voted by a majority of his own board, followed by Martin's subsequent surprise resignation, had been "blown out of proportion," and was not a "cataclysmic" event.
"I don't think it was a palace revolt or anything of that nature. I think the four-member majority were of the opinion that the time had come, that the economy was not nearly as strong as a lot had expected for the first quarter, and it needed a boost through lower short-term interest rates," he said.
He acknowledged that "the chairman was probably worried about the effect on the dollar and wanted to orchestrate it with other nations . His opponents backed off, gave him time to do it, he was able to orchestrate it, and I would assume it's 'business as usual.' "
He also vigorously denied that he has any personal "animus" against Volcker, or was conducting a "vendetta" against him, as has been reported in Wall Street circles.
"I like Paul Volcker, although there have been times professionally when we have disagreed on monetary policy," Regan said.
The Fed's seven-member board had voted 4 to 3 on Feb. 24 to lower the discount rate -- the interest charged member banks -- over Volcker's objection, with all four Reagan appointees opposing the chairman. The vote was taken on Martin's insistence, but then withdrawn. Volcker had urged a delay until the move could be coordinated with Japan and West Germany. On March 6 and 7, all three countries lowered their rates.
The 4-to-3 anti-Volcker majority on Feb. 24 developed after the appointment to the board of two new governors, Wayne Angell and Manuel Johnson, replacing those who had consistently voted with Volcker. Angell and Johnson, known to be in favor of an easier monetary policy than being followed by the Fed, made a majority of four with Martin and Martha Seger, earlier Reagan appointees.
Yesterday, Regan said that "it is unfortunate the way the thing leaked out, and all of Wall Street jumped on it. I think it's minutiae."
Asked if he thought Volcker could survive another 4-to-3 vote against him, "That would be Paul's choice. As far as we're concerned, we're not asking him to resign or change at all," Regan said.
Regan's comments that the White House expects Volcker to stay on, and that it might even find itself discussing a third term with him next year, arose in reaction to the charge made by some critics that the administration was trying to provoke Volcker into resigning by surrounding him with a hostile board.
Regan denied the charge: "That's a Machiavellian approach . . . but you have to recognize that any president is entitled to his own people on this or any other board during the time he is president, unless by law he has to appoint members of the other party. The same thing holds true of judgeships.
"And it would be very odd for a president to pick people for boards whose philosophy is not similar to his. Now, to the extent that Paul Volcker's philosophy differs from Ronald Reagan's, he would be surrounded by people whose philosophy is closer to Ronald Reagan's.
"But I'm not sure that their philosophy in which both want fiscal discipline and steady growth of the money supply is that far off," the president's chief adviser said. He added that Volcker is well aware of the president's ideas on these matters, and that the two men meet from time to time in unpublicized sessions. "I dare say that will continue."
He insisted that the Martin resignation was coincidental to the larger debate over the proper timing of the discount rate. But he confirmed that Martin quit because "he didn't feel he could honestly serve another four years as vice chairman unless he got the high honor of being named chairman."
There was no way of giving him such a guarantee, Regan said. "We discussed whether or not he would be a candidate in the event that we decided not to reappoint Volcker in 1987, and I answered him, 'Yes, of course you will be a leading candidate.' " Regan emphasized he had said "a" leading candidate and not "the" leading candidate, and that still will hold true after Martin leaves the board.
And he responded that he himself would not be be interested in the Fed chairmanship. "Step down?" he responded with feigned amazement to the question.