August 13, 1982

The board of the Island Trees Union Free School District, whose banning of nine books from school libraries nearly seven years ago touched off a national controversy, voted tonight to return the books to the shelves. But the board said in a formal statement that librarians would be required to send notes to parents whose children check out the books in the four Nassau County communities it covers. The board's removal of the books, which include ''The Fixer'' by Bernard Malamud, which won the Pulitzer Prize for fiction in 1967, and ''Slaughterhouse-Five,'' by Kurt Vonnegut Jr., had been challenged by five students. In late June, the United States Supreme Court ruled that a trial was warranted to determine whether the board's action had violated the students' First Amendment rights to freedom of speech.

A House-Senate conference committee broke a two-day deadlock on welfare spending tonight, then resumed deliberations on other features of the bill to raise $98.9 billion in additional tax revenue over the next three years. The session was expected to last through much of the night, and Senator Bob Dole, Republican of Kansas and chairman of the conference committee, said he hoped the panel would complete its work on Friday. In only 30 minutes, the committee completed approval of the entire spending portion of the bill, which would cut spending by $17.5 billion over the next three fiscal years, somewhat more than the $16 billion the committee had been asked to cut. The panel then moved directly to the tax portion of the bill, but its progress was slow as it moved from one provision to the next, deferring action on many of them until later in the night.

DESPITE the recent slowdown in the art market, the art scene in the Hamptons on the east end of Long Island has been expanding at a phenomenal pace. In the 1970's, there were at most half a dozen galleries in Southampton, Bridgehampton, East Hampton and Amagansett. Now there are 16. The number of artists in the Hamptons has not so much grown as multiplied. ''In 1978 we had to spend a long time finding artists to show,'' said Jim Wilson, director of the Peter S. Loonam Gallery on Main Street in Bridgehampton. ''Now the gallery looks at the work of 400 to 500 artists a year.'' The 1981-82 gallery explosion reflects two key developments. For the first time, New York City galleries are entering the Hamptons market: four of the eight galleries that have opened in the last two seasons are based in New York City. Also for the first time, there is a widespread attempt to exhibit and deal in crafts.

Wall Street was shaken again yesterday by the failure of a littleknown government securities firm, Lombard-Wall Inc., and its wholly owned subsidiary, Lombard-Wall Money Markets. In a bankruptcy petition, Lombard-Wall Inc. listed debts of $177.2 million to its 10 largest unsecured creditors. The two biggest were the Chase Manhattan Bank, which was owed $45 million, and the New York State Dormitory Authority, which was owed $55 million. The authority is a public agency that issues bonds to finance dormitory construction at state institutions. Chase recently suffered a major loss from its involvement with another of the numerous small firms that participate in the huge market for trading government securities. In May, Chase declared a pretax loss of $285 million as a result of the failure of Drysdale Government Securities, which the bank had served as a middleman. Chase was forced to pay out this money after Drysdale failed to pay interest owed on Treasury securities that it had borrowed from other firms.

Federal Judge Harold H. Greene has won broad praise for his Solomon-like decision ordering changes in the proposed antitrust settlement reached by the American Telephone and Telegraph Company and the Justice Department. The 10 changes he proposed will appease the many powerful and noisy political and industry groups that were unhappy with the settlement, it is felt, managing at the same time to respect the interests of A.T.& T. and the Justice Department enough to preserve the agreement. ''I think the decision was just breathless,'' said Thomas J. Casey, a Washington lawyer and former deputy chief of the common carrier bureau of the Federal Communications Commission. ''It showed a remarkable sensitivity to a whole calculus of factors.''