Wallich, an Ally of Volcker, Quits Fed

Henry C. Wallich, the senior member of the Federal Reserve Board, resigned Monday because of poor health, giving President Reagan an opportunity to appoint a member more inclined to favor faster economic growth.

Wallich has been an ally of Fed chairman Paul A. Volcker, who has favored a tighter money supply to combat inflation. The four members appointed by Reagan generally have been more aligned with the Administration’s belief that the economy can grow faster without precipitating a revival of inflation.

With Wallich’s resignation, and the earlier announcement by member Emmett Rice that he would leave at the end of this year, Reagan will have had the opportunity to choose six members of the seven-member board.

Wallich’s departure will leave Volcker even more isolated in his concern about inflation, while his colleagues are worried about recession.

‘An Inflation Fighter’

The Fed’s actions determining the growth of the nation’s money supply affect millions of consumers and businesses.

Interest rates rise and fall in response to the rates the Fed charges banks for borrowing from the Fed and to its manipulation of bank reserves through the sale of government securities.

Wallich, 72, a native of Germany, has been in poor health for months. He was appointed by President Richard M. Nixon in March, 1974, and has served longer than any other current member of the board.

Volcker praised Wallich as “first of all, an inflation fighter, deeply committed to the needs for currency and financial stability. That belief motivated his service on the board, and he brought to that effort a combination of theoretical insight and practical experience rare in any individual.”

Teaching, Public Service

Wallich, in a 45-year career as an economist, has combined teaching with public service. He formerly was chief of the foreign research division of the Federal Reserve Bank of New York and worked as an economics professor at Yale University for 23 years. He served in the Treasury Department in 1958 and 1959 and as a member of President Dwight D. Eisenhower’s Council of Economic Advisers from 1959 to 1961.

Wallich handled the international dealings of the Fed, which has been working closely with central banks in other countries to coordinate policies during an era of massive international flows of money and a sharply fluctuating value of the dollar. Wallich’s “financial diplomacy stands as a lasting contribution to international monetary cooperation,” Volcker said.