Escalating the growing was over the fate of City Councillor William H. Walsh, the Cambridge Civic Association voted last week that Walsh, a convicted felon, should resign.

The vote came at a meeting of the association's board of directors last Thursday, and the balloting was made public yesterday.

Four of the five city councillors who are affiliated with the association, Cambridge's largest and most liberal political party, have already expressed support for removing Walsh from the council. But the fifth association councillor, Mayor Kenneth E. Reeves '72, has effectively blocked the move.

When the council voted on the issue earlier this spring, it split four-to-four with Reeves casting a vote for his friend Walsh.

Some have suggested that Reeves' support for Walsh stems from the fact that the convicted city councillor's vote helped him to re-election as mayor in January. In that vote, Independent councillors such as Walsh backed Reeves, while the other four association councillors--the mayor's former political allies--opposed him.

The mayor, in fact, testified on the city councillor's behalf in March, when Walsh was convicted on 41 counts of bank fraud in connection with a scheme to swindle the Dime Savings Bank of New York of $2.9 million.

Prosecutors argued successfully that Walsh concealed second mortgages that were granted to cover a 20 percent down payment on loans.

In recent weeks, however, Dime borrowers andlegal experts have suggested that federalinvestigators were wrong to target Walsh. Theysaid employees of the bank may have perpetratedthe fraud, and that Walsh was used as a scapegoat.

"There was a pattern of falsifications ofsecond mortgages," Richard V. Kelleher, who headsthe Dime Borrowers Association on Cape Cod, saidin an interview earlier this month. "The bank setup the whole scheme, but the bank walks offclean."

In addition, borrowers note that in a recentcompanion case to the prosecution of Walsh, 102counts of bank fraud against attorney Alan H.Segal were dismissed. The difference in that casewas that Judge Edward F. Harrington allowedtestimony about Dime, while Walsh's judge, Mark L.Wolf, ruled such lines of inquiry out of order.

Borrowers allege that Dime set up a loanprogram in the late '80s called the "no documentloan program" which ensured loan approval within48-hours. Vital information about those who tookout loans was not verified under this system