Record profits and fat bonuses for employees of Goldman Sachs (NYSE:GS) seem to be all that anyone can talk about. You could almost forget that other investment banks also made obscene amounts of money this year.

Bear Stearns (NYSE:BSC) released fourth-quarter results that will excite New York real estate agents and cause anguish for hand-wringers who worry about a society that pays bankers so well and teachers so modestly. The smallest of the big, publicly traded securities houses, Bear posted its best quarter ever, with net income of $563 million or $4 per diluted share, a 38% increase from the fourth quarter of 2005. Employee compensation and benefits for the year totaled 47% of the firm's $9.2 billion in revenue, compared with the 43% share paid to employees of Goldman.

In spite of the generous cut taken by Bear's employees, the firm's shareholders also managed to do very well this year. Net income for the fiscal year was $2 billion, which resulted in a net margin of 22%. Return on shareholders' equity increased slightly to 19%, but Bear continues to lag its peers in this important measure of capital efficiency. The market, however, was unequivocal in its enthusiasm for Bear's performance. Following Bear's earnings release, the company's share price rose to nearly $160, an increase of 2.6%.

Revenue from capital markets activities was the most important component of Bear's earnings. Investment banking revenues rose by 58% to $364 million on higher underwriting and M&A transaction volumes. Fixed-income revenues totaled $1.1 billion, a 25% increase, on higher volumes of credit derivatives, high-yield debt, and leveraged finance. Overall, the Capital Markets group produced $1.8 billion in revenue, a 26% increase from the prior year, and approximately 75% of the firm's total revenues.

A potential troubling element included in Bear's earnings report was the anemic performance of the firm's Global Clearing Services unit, in which revenues increased by only 7% for the quarter and just 3% for the full year. Such tepid growth during a period of dynamic market activity suggests that competition in the prime brokerage business (essentially providing trading services to hedge funds) may be eroding one of Bear's traditional strengths. In addition, Bear's reliance on fixed-income trading may turn out to be a significant drag on Bear's performance relative to its banking peers if equity markets continue to deliver robust returns in 2007.

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Fool contributor Michael Leibert welcomes your feedback. He does not have a position in the stocks of any of the companies mentioned above. The Fool has a shiny disclosure policy.