No. 2 in Washington

Paul Volcker's rumpled suits and inexpensive Antonio y Cleopatra cigars have been Washington landmarks since 1979, when President Carter named him Federal Reserve Board chairman and gave him an urgent mandate to fight inflation. Volcker, 55, has carried that out with a zeal that has made him conspicuous in a town that bends easily before political winds. Says Jake Garn, chairman of the Senate Banking Committee: "Sometimes he seems to be the only person in the country capable of sticking to an economic policy." More than a few observers call Volcker the second most powerful man in Washington.

Volcker's term as Federal Reserve chairman expires in August, and both Washington and Wall Street have been anxiously wondering whether he will serve another four years. He throws up smokescreens when the subject arises. Last week, when Tennessee Senator James Sasser asked Volcker pointblank whether he would be seeking reappointment, the Fed chief replied laconically, "I don't seek jobs."

He certainly has good reasons for not seeking another term. His $69,800 annual salary is a fraction of what he could make with a major bank or corporation, and the job requires him to commute between Washington and Manhattan, where his arthritic wife works as a bookkeeper and houses a boarder to help pay the bills. Yet Volcker clearly loves his present work. Says a close associate: "There's no job anywhere at any salary that would be as exciting or as important or as historic."

Because Volcker could obviously command a big job and big money at a private financial institution, rumors inevitably crop up that he will leave Washington. One now circulating among Chase Manhattan executives has Volcker as a strong candidate to become chairman of the bank, which has suffered a string of financial reversals since Willard Butcher succeeded David Rockefeller in 1981.

President Reagan is as mum about his intentions as is Volcker. Reagan says that he has not yet decided whether to ask Volcker to stay, and his advisers' private guesses about what he may do are mixed. Says one Treasury Department insider: "No President can resist the temptation to put his own man in a spot that powerful." But at least one top economic adviser to the President, impressed with the way Volcker has helped to bring down the inflation rate, hopes the Fed chairman will stay. Says he: "I think we would all benefit if he got another term."

One possible successor is Preston Martin, the California businessman whom Reagan named Federal Reserve vice chairman last year. Walter Wriston, chairman of Citicorp and an outside Reagan adviser, is also mentioned, as are three former chairmen of the Council of Economic Advisers: Herbert Stein and Paul McCracken, who served under Richard Nixon, and Alan Greenspan, who was Gerald Ford's top guru.

Volcker's prestige was in clear view last week as he briefed the Senate Banking Committee on Federal Reserve policies for 1983. Declared Wisconsin Democrat William Proxmire at the start of the 3 1/2-hour session: "You're the key man. You're the one who'll decide what's going to happen to the U.S. economy--to the world economy--for the coming year." Volcker said the Federal Reserve plans to let the money supply grow only slightly less rapidly than it did in 1982. That should help hold interest rates low enough to promote the recovery, he asserted, while keeping inflation under control.

His remarks cheered Wall Streeters, who have been among Volcker's warmest backers. Many are willing to overlook the Federal Reserve's tolerance of occasional erratic swings in money growth because they support the chairman's long-term goal of stabilizing prices. Last week Edward Yardeni, senior vice president and chief economist of Prudential Bache Securities, put the Street's sentiments succinctly. "Under Volcker," said he, "the Fed has regained its credibility." This file is automatically generated by a robot program, so viewer discretion is required.