Colm A. Kelleher, the chief financial officer at Morgan Stanley, expressed frustration with the markets. “Where is the logic?” he said.  The latest results are unlikely to end the debate on Wall Street over what lies ahead for Goldman and Morgan Stanley, and whether one or both of them might seek a marriage with a commercial bank or other deep-pocketed financial company to strengthen their positions.  The good news from Goldman arrived early on Tuesday in what was another anxious day on Wall Street. Goldman, whose profit shattered Wall Street records in 2006 and 2007, reported earnings of $845 million, or $1.81 a share, in the third quarter.  That was a 70 percent decline from a year earlier and Goldman’s weakest showing since it went public nine years ago. Even so, the results surpassed many analysts’ forecasts.  Goldman’s share price fell about 1.8 percent, to $133.01, in large part because of concerns over the fate of the American International Group, the troubled insurance giant.  Morgan Stanley reported a profit of $1.425 billion, or $1.32 a share, down 3 percent from the third quarter last year. The profit was a 39 percent improvement over last quarter.  Morgan Stanley’s shares spiraled roughly 28 percent on Tuesday morning. After zigzagging through the day, the shares closed down 10.8 percent, at $28.70.  “I’m hoping that this will generally help calm the market,” Mr. Kelleher said. “The markets are behaving irrationally, and there’s a lot of fear.”  Worries over the fallout from A.I.G. and Lehman Brothers, and the future of independent investment banks in general, seem to be driving the markets. Mr. Kelleher also said there were “unfounded rumors” flying.  These are trying times even for Goldman, a firm that is often the envy of Wall Street. Mr. Viniar said the third quarter was the most challenging period that Goldman had experienced as a public company, a view echoed by the firm’s chairman and chief executive, Lloyd C. Blankfein.  “This was a challenging quarter, as we saw a marked decrease in client activity and declining asset valuations,” Mr. Blankfein said.  But while many financial companies are struggling under the burden of worrisome mortgage investments, Goldman, Mr. Viniar said, does not have many mortgage assets left. The firm sold $4 billion in mortgages that were not backed by Fannie Mae or Freddie Mac, the finance giants, during the fourth quarter. He added that the sale prices were at or above where Goldman had marked the assets.  Asset prices spiraled downward on Monday, particularly in the mortgage area, after Lehman filed for bankruptcy, Mr. Viniar said.  “I think time’s going to tell whether that’s temporary or not,” he said. “Or whether that was really just fear-driven.”  Goldman cut its compensation expenses in the quarter by just over a third from last quarter, but slightly increased its head count because of the hiring of college and business school graduates. The drop in compensation expenses points toward lower bonuses in December.  Morgan Stanley’s compensation expenses increased in the quarter, as the company tried to lure sought-after workers to its ranks.  Both companies highlighted their stronger areas. Goldman said it ranked first in assisting in announced and completed mergers and acquisition this year, and its prime brokerage firm — which is within its asset management unit — produced near record revenue. Revenue in Morgan Stanley’s trading unit was $2.6 billion, up 89 percent.  And both rebutted the notion that they need to merge with commercial banks to survive. They said that bank deposits had rules about how they could be used and that they would not support many of their businesses.  Still, Mr. Viniar acknowledged that such a merger would provide stability in the minds of investors.  “They make people feel better,” he said. “But we think our business model works pretty well.”  Lehman Brothers’ collapse was never far from bank analysts’ minds during the two investment banks’ conference calls on Tuesday. At the end of Morgan Stanley’s call, the analyst from Lehman Brothers who covers investment banks asked a question.  Mr. Kelleher responded, “Hey Roger, it’s nice to hear from you.”  A version of this article appears in print on , on Page C1 of the New York edition with the headline: Goldman Posts Profit, And Morgan Follows Suit. Order Reprints| Today's Paper|Subscribe
Goldman Sachs posted quarterly profit that beat analysts’ expectations, while Morgan Stanley reported profit that was even stronger than Goldman’s.