OVER the years, H. Erich Heinemann notes, there has been a tendency ``to deify'' Federal Reserve Board chairmen. That was the case with William McChesney Martin in the 1960s and Arthur F. Burns in the early 1970s. It's happening nowadays with Paul A. Volcker, says Mr. Heinemann, chief economist at Ladenburg, Thalmann & Co., a New York brokerage firm.
One reason may be that most of the time Fed chairmen talk a stern line about fighting inflation -- though monetary action may be looser than the talk. After a while, the financial community begins to think of these individuals as indispensable to the nation's economic welfare.
Wall Street doesn't want ``politicians,'' whether in the White House or Congress, messing with monetary policy. It believes that politicians are mainly concerned about being reelected and that they will permit the dollar to plunge in value if that is necessary to stimulate the economy sufficiently to win at the polls.
According to this view, the Fed, whose members are appointed to office for long terms, becomes the bulwark against irresponsible actions by politicians. The chairman of the Fed, because of his key role in that monetary policymaking agency, becomes the lead hero.
Right now hero worship of Fed chairman Volcker has become a problem for the White House. According to reports from Washington, the Reagan administration wants Mr. Volcker out of the marbled home office of the Fed on Constitution Avenue. President Reagan reportedly offered him a prestigious substitute position -- the presidency of the World Bank. He has declined.
Perhaps Mr. Volcker's refusal to move should be no surprise. It is often said that the chairman of the Fed, because of his key influence on the world's largest economy, is the second-most-powerful official in the West after the US president himself. The World Bank job is clearly less important, though that institution dispenses some $12 billion in loans per year to developing countries.
There are two key questions in this issue. First, do Fed chairmen deserve hero status? Second, should an administration have the responsibility as well as the political blame or praise for monetary policy?
During Mr. Martin's long term of office, inflation was held to around 2 percent. But the nation suffered from sharp recessions.
Dr. Burns, who retired last spring from the US ambassadorship in Bonn, presided at the Fed when inflation began a decade-long acceleration. Both the Fed and European central banks boosted the supply of money to sharply higher levels -- at least by the standards of those days. Dr. Burns, says Mr. Heinemann, ``has worn very poorly from a historical perspective.''
As for Volcker, during his six years in office the nation has had two severe recessions, inflation has plunged sharply, and monetary policy has oscillated from slow to rapid money growth every six to nine months, almost. Interest rates have gone up and down like a boy on a pogo stick.
All these Fed chairmen have been well intentioned, trying to guide the nation's economy smoothly through the stresses of dollar devaluation, OPEC actions, major corporate or banking bankruptcies, developing-country debt crises, budget deficits, and other problems.
Still, the economic record indicates that Fed chairmen certainly should not be above criticism and are not indispensable to their office.
Indeed, monetarist economists -- those who put great weight on the importance of the nation's money supply -- often blame the Fed for creating economic instability. They regard the ups and downs of the nation's money supply during this decade as the prime cause of the periods of fast and slow (or negative) growth.
Heinemann criticizes Volcker for creating no structural or systematic way of governing monetary policy at the Fed. He credits Volcker, however, for stopping money growth each time when it began to get out of hand.
The second issue arises from the fact that the electorate tends to give a presiding president the blame or benefit of the results of a monetary policy conducted by an independent (or semi-independent) agency, the Fed. Good times help reelect a president (Richard Nixon); bad times may help defeat him (Jimmy Carter).
The seven governors and five Fed branch presidents that make up the Federal Open Market Committee determine monetary policy. The president can possibly influence policy by his regular meetings with the Fed chairman or by going public with praise or criticism. But he cannot order a change in policy.
Over the long run a president may influence policy by his appointment of the Fed's seven governors. Mr. Reagan has just appointed two of them who may differ from Mr. Volcker by opposing a tightening up of monetary policy soon.
Like Supreme Court justices, however, once in office, Fed governors often vote contrary to the wishes of those who nominated them. Thus tensions between the White House and the Fed will remain -- and may increase as the 1986 elections approach, since easy money could help the GOP in crucial Senate races.