NEW YORK (Reuters) – Goldman Sachs Group Inc (GS.N) said third-quarter earnings plunged 70 percent as one of the markets worst slumps ever sapped revenue in almost every business while fueling investment and credit losses.

Ed Note: We think this is particularly significant for our money man, Andrew Gause, (Wednesdays live 7-8 PM One Radio Network), often details why Goldman Sachs is the premier “connected” banking giant in the world. They are who we affectionately call, “The Boys.”

The largest U.S. investment bank reported net income of $845 million, or $1.81 a share, for the quarter ended August 29, down from $2.85 billion, or $6.13 a share, a year earlier. Net revenue fell by half to $6.04 billion from $12.3 billion.

“To think that any financial firm can avoid being scathed by this meltdown is naive,” said Walter Todd, portfolio manager at Greenwood Capital Associates in Greenwood, South Carolina.

The earnings beat analystssharply reduced expectations of $1.75 a share, but revenue fell short of the consensus forecast of $6.3 billion, according to Reuters Estimates.

In trading before the bell, Goldman shares fell more than 5 percent to $128.13 a share, their lowest level in two an a half years.

The results come as the year-long credit crunch builds up steam. Six months after Bear Stearns collapsed and was acquired by JPMorgan Chase (JPM.N), Lehman Brothers Holdings Inc (LEH.P) on Monday filed for bankruptcy protection while Merrill Lynch & Co (MER.N) rushed into the arms of Bank of America Corp (BAC.N).

As expected, Goldman Sachsinvestment banking revenue dropped 40 percent amid a dearth of deal activity. Fixed-income trading revenue plummeted by two-thirds, reflecting weak credit and mortgage trading results, while equities trading revenue fell by half.

The quarter also included $1.1 billion of losses on financing for junk rated companies, residential mortgages and commercial mortgages.

“This was a challenging quarter as we saw a marked decrease in client activity and declining asset valuations,” Lloyd Blankfein, Goldmans chief executive, said in a statement.

Moreover, Goldman, the most aggressive investment bank in betting its own money, recorded a net loss of $453 million from principal investments. Asset management revenue fell 6 percent, reflecting lower fees, falling market prices and a $7 billion net outflow of assets.

Yet Goldman managed to beat earnings expectations, however reduced, and posted a profit in one of the toughest markets in a decade.

“This is a heroic effort,” said Mike Holland, chairman of investment firm Holland & Co in New York. “I think we have probably not seen a more challenging environment than the one that we are going through right now.”

Lehman last week reported a third-quarter loss of $3.9 billion — on the heels of a $2.8 billion second-quarter loss — fueled by nearly $8 billion in write-downs as well as steep declines in banking, underwriting and trading revenue. The loss, and worries that it had failed to raise enough capital, ultimately forced the 158-year-old firm into bankruptcy.