With firms like Goldman Sachs and Morgan Stanley reporting weak results for last year, Wall Street is having to confront doubts about itself.

Is this a temporary slump? Or will the moneymakers never get to go back to their high-rolling ways? Many on Wall Street had hoped 2011 would be a year when the investment banks showed that they could still make solid profits in the more sober financial environment that has followed the 2008 crisis.

Instead, Goldman Sachs?s earnings fell 67% last year; Bank of America?s investment banking operation, which includes Merrill Lynch, suffered a 53% decline in net income; and Morgan Stanley?s earnings were down by 42%.

Some of the forces that weighed on earnings last year ? like Europe?s government debt crisis and a sluggish United States economy ? could go away. Yet Wall Street still faces permanent pressures on profitability, particularly stricter regulations aimed at making the financial system safer. For instance, Wall Street firms cannot borrow such large amounts of money and make bets with it. With much less of this kind of leverage, the game is changed ? perhaps forever.

?No matter how you cut it, the Goldman Sachs of tomorrow is not going to be the Goldman Sachs of 1999, when it did its IPO, or the Goldman Sachs of 2006, when it was at the high point of the cycle,? said Brad Hintz, a senior analyst with Sanford C Bernstein & Company.

As profits fall way short of internal targets, the executives who run Wall Street may have to cut back hard, to stop profits from falling even further. When asked by an analyst on Wednesday whether Goldman Sachs was thinking of downsising to deal with the difficult business conditions, David A Viniar, the bank?s chief financial officer, said, ?That is one of the most critical questions and a very difficult one to answer.?

Wall Street employees are feeling the squeeze this bonus season, which is going on right now. In

2011, Goldman set aside $12.22 billion to pay compensation and benefits for its 33,300 employees. That comes out to around $367,000 per person. In 2006, the firm paid out $16.46 billion in compensation and benefits, or roughly $621,000 per employee. At Morgan Stanley, which lost money in the fourth quarter, cash bonuses were capped at $125,000 per person.

The retrenchment has hurt morale among lower-tier workers. Young bankers and traders fresh out of Ivy League universities can no longer count on earning more than their peers in other prestigious industries, such as management consulting and law. Rounds of layoffs, which used to be aimed mainly at senior and midlevel employees, have cut through the junior ranks this year at firms like Credit Suisse, and bonuses are down for nearly everyone.

At Goldman Sachs, some young analysts ? a group that could earn year-end cash bonuses of up to $80,000 in better years ? were given as little as $20,000

this year, according to one person with knowledge of this year?s numbers.

The Volcker Rule, which is aimed at stopping banks from making financial bets for their own accounts, could permanently eat away at bond trading revenue.

Still, Jamie Dimon, the chief executive of JPMorgan Chase, struck a more optimistic note in talking to reporters in a conference call last Friday. Noting that there were always swings in the investment banking business, he said, ?I think when things come back, these numbers could boom again.?

Bank of America?s CFO, Bruce R Thompson, said he thought the continued downdraft in trading revenue was temporary, rather than representing a long-term shift in the Wall Street landscape.

?There?s always this question of what?s normal versus what?s not,? he said, adding that the first few weeks of 2012 had seen a pickup in trading activity.

If his optimism proves wrong, and revenues remain depressed, though, more cuts loom. ?Operating at a loss,? Thompson said, ?isn?t something we will continue to want to do.?