It's looking awfully good to be Goldman Sachs Group Inc. (GS) these days. With Lehman Brothers Holdings Inc. (LEH) backed into a corner, Morgan Stanley (MS) stumbled out of the gate on Wednesday after announcing that net earnings had fallen to just $1.03 billion in the second quarter, or 95 cents a share, compared to $2.36 billion, or $2.24, a year earlier. The drop of more than 50 percent was attributed to trading losses and a slowdown in investment banking, despite significant pretax gains from asset sales. Morgan Stanley was propped up by a $698 million on the sale of its Spanish wealth management business, and by the sale of part of its stake in equity index provider MSCI Inc., which delivered another $732 million. To say analysts were less than sanguine over the numbers would be an understatement. Via Reuters, the reaction of Matt McCormick, a stock analyst at Bahl & Gaynor Investment Counsel in Cincinnati, was telling. "If you have to go all the way to Spain to make numbers, it's not good. How many more rabbits do they have in their hat?" he is quoted by the news agency as asking. "What's going to be the driver of earnings growth going forward?" Mortgages certainly don't appear to be the answer, at least in the short term. Morgan Stanley's fixed-income revenue -- which include its mortgage business -- decreased an eye-popping 85 percent on a year-over-year basis to $414 million, due in part to a loss of $436 million on mortgage-related trades (the company also lost $519 million in leverage loan trades). The Wall Street investment bank also became the third to fall victim to a rogue trader's mispricing of assets, with CFO Colm Kelleher saying in a conference call that a London trader had incorrectly valued positions by roughly $120 million, although the company caught the deception earlier than others plagued with the same problem. Credit Suisse Group (CS) in February said that it had overvalued ABS in its portfolio by at least $2.85 billion, while in January, Societe General was rocked by a $7 billion scandal involving rogue trader Jerome Kerviel. Despite the ongoing turmoil, CEO John Mack said that Morgan Stanley has remained focused on liquidity. "Given the turbulent environment this quarter, we stayed close to shore and continued strengthening the firm's capital and liquidity positions," he said. "Average total liquidity over the course of the quarter was $135 billion and we finished the quarter with $169 billion in total liquidity." Shares in the New York investment bank closed up 0.25 percent at $40.69 in heavy trading on Wednesday, after a roller coaster ride that saw shares open at $37.88 earlier in the day. Disclosure: The author held no positions in any of the publicly-traded firms mentioned in this story when it was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.