Lehman Brothers and Goldman Sachs have provided hope that the credit storm that drowned Bear Stearns will pass.

Both firms reported sharp declines in their first-quarter profits, but the results surpassed forecasts.

For Goldman, exceeding expectations is a trick that it performs with astonishing regularity.

For Lehman, doing so should help soothe fears that Lehman could become the next Bear. And that should go a long way toward stabilizing very nervous markets.

Shares of Lehman have been pummeled in recent days, in a replay of 1998 when the Asian financial crisis, the Russian default, and the collapse of the giant hedge fund Long-Term Capital Management prompted speculation that Lehman would be swamped as a result.

Richard Fuld, Lehman's chief executive now and in 1998, told Jenny Anderson of the New York Times that "1998 was pretty ugly for us. This is uglier for the system—it's more pervasive and more global."

Lehman weathered the 1998 storm to become a much stronger player. In recent days, the firm has been highlighting its strong liquidity position ($34 billion at the end of the first quarter; Bear had $15 billion at the end of last year).

In addition, Lehman says it has assets that can be readily sold: $64 billion as well as $99 billion at its regulated entities.

"In what remains a challenging operating environment, our results reflect the value of our continued commitment to building a diversified platform and our focus on managing risk and maintaining a strong capital and liquidity position," Fuld said in a statement.

Citing the "continued deterioration in the broader credit markets," Lehman's capital markets business had a 52 percent decline in revenue for the quarter, to $1.7 billion. Revenue at investment management, however, rose 39 percent, to $968 million.

For the quarter, Lehman earned $489 million, or 81 cents per share, down from $1.2 billion, or $1.96 per share, in the quarter a year ago. Net revenue fell 31 percent.

Goldman Sachs reported a 53 percent decline in first-quarter earnings, but the firm's results easily exceeded estimates.

For the quarter, Goldman Sachs earned $1.5 billion, or $3.23 per share, compared with $3.2 billion, or $6.67 per share, in the quarter a year earlier.

The credit crunch had a impact in the quarter, and the firm reported net losses of $1 billion on residential mortgages and securities. It had another $1 billion loss (or $1.4 billion before hedges) on credit derivatives. Net revenues in its trading and principal-investments businesses fell 46 percent from the quarter a year ago and were down 26 percent from the fourth quarter.

Investment banks also suffered from the slowdown in deals and debt underwriting. Net revenues in investment banking fell 32 percent from a year ago.

Still, asset management was strong, with revenues rising 28 percent from a year ago.