Rumors that Goldman Sachs (GS) will have to raise more money have helped push its stock from $123 less than a month ago to $71 yesterday.

Wall St. wants to believe that the money which the venerable trading house got from Warren "Warrant" Buffett and the US Treasury was not enough. Goldman is in trouble, they say, like Morgan Stanley (MS) and Merrill Lynch (MER) before it.

The head of Goldman says that is hogwash. CEO Lloyd Blankfein said the firm does not need a deal or more capital to stay afloat. Clearly in a defiant mood he told a conference, "We’re going to consider everything," but won’t be provoked into "doing something rash" that the company will spend years reversing, according to The Wall Street Journal.

Like other Wall St. CEOs, Blankfein may be seeing a bottom to the credit markets. There is some modest sense in that. Treasury is pumping money into financial firms. Bernanke’s emergency funds window at the Fed is trading hundreds of billion of dollars in bad paper from banks and giving them real cash. The Fannie Mae (FNM) and Freddie Mac (FRE) programs to help homeowners work out their mortgages and keep their homes may well put a foundation under the housing market.

But, the comments from the heads of Morgan Stanley, Lehman, and Merrill, all made last spring, were wrong. The bottom was not even close and it may not be now. Even if housing finds some stability, huge industries like retail and automotive may not recover for years. Small businesses still have no access to capital even though they represent over 50% of the nation’s jobs. Unemployment could still move to 10% and a recession could get deeper and move into 2010.

Blankfein might have been better off just saying that he thinks Goldman will be OK unless the world falls apart.

Douglas A. McIntyre

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