URGE TO MERGE

Morgan Stanley CEO John Mack spent most of yesterday fielding calls from bank executives who were trying to feel out his interest in a tie-up, according to sources familiar with the matter.

Among those who’ve reached out to Mack was Wachovia Bank CEO Robert Steele, who yesterday inquired about “helping” the firm as both Goldman Sachs, the white-shoe investment bank and its only remaining US rival, and Morgan faced Wall Street’s waning confidence about their future as standalone entities.

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Sources said Mack also took calls from executives at Wells Fargo about a possible merger, but was not having discussions with China’s Citic, a source close to the situation said.

All of the discussions were described as preliminary and didn’t necessarily signal a deal might emerge.

Mack and Goldman CEO Lloyd Blankfein have found themselves in the curious position of having to defend the viability of their firms a day after both posted healthy, albeit shrinking, profits.

Sources told The Post that pressure was mounting on Mack to strike a deal with a big commercial bank before the end of the week in order to avert further stress to the markets.

At this point, the most likely match for Morgan may be Wells Fargo, which has fared better than its commercial banking rivals in weathering the credit crisis. Wachovia, which owns hundreds of billions in tanking option-arm mortgages, is viewed as a much shakier operation.

Both Goldman and Morgan Stanley are facing a rapidly changing Wall Street landscape and watching their costs of doing business ratchet up a day after the Federal Reserve announced an historic $85 billion bailout of insurance titan American International Group.

Yesterday, the market reacted violently to the feds’ push to protect the badly wounded mechanisms of Wall Street.

On a day when the Dow Jones industrial average plunged nearly 450 points, shares of Morgan were slammed 24 percent to close at $21.75. Goldman, meanwhile, lost around 14 percent to $114.50.

That sharp drop led Mack yesterday to rip out a page from disgraced Leh man Brothers’ CEO Dick Fuld’s playbook and blame the wild movements of Morgan’s stock on short sellers.

“What’s hap pening out there? It’s very clear to me – we’re in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down,” Mack wrote in a memo to employees designed to soothe the mounting panic within the bank.

“You should know that the management committee and I are taking every step possible to stop this irresponsible action in the market,” he added. “We have talked to Secretary Paulson and the Treasury.”

Reps from Morgan, Goldman and the banks either declined to comment or did not return calls.

Lately, Mack has considered finding a merger partner willing to provide him with a big deposit base and access to the Federal Reserve borrowing window, according to sources.

Few firms have felt the pain from the credit crunch as badly as investment banks like Goldman and Morgan, and with Lehman Brothers having gone bankrupt and Bear Stearns and Merrill Lynch having been forced into marriages with commercial banks, all eyes are on Mack and Blankfein.