By Stephen Gandel
July 16, 2013

FORTUNE — Goldman Sachs’s profits in the second quarter more than doubled from a year earlier to $1.9 billion, propelled by a surge in stock and bond offerings. Trading revenues were up as well from a year ago, but down from the first quarter, perhaps showing how the recent rise in interest rates prompted clients to retreat.

“Client risk appetite definitely fluctuated during the quarter,” Goldman’s CFO Harvey Schwartz told analysts and investors on a conference call about the bank’s earnings. “Our clients are assessing whether improvements in the U.S. economy will offset the slowdown elsewhere.”

Goldman itself appeared to be able to capitalize on the improving U.S. economy and the rising stock market. Fees from stock market underwriting and trading rose 55% and 25% from the same period a year ago. Bond market underwriting fees were also up 40%. And Goldman’s own equity investments, some of which are in private companies, generated an additional $500 million in gains in the quarter.

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In all, Goldman’s earnings translated to $3.70 per share. That was far better than the $2.82 analysts had expected the firm to earn. Revenue was up 30% from a year ago to $8.6 billion. And the big bottom-line jump happened even though Goldman (GS) appears to have decided to up the pay of its already richly rewarded employees. So far this year, Goldman has booked a compensation expense, which includes benefits and salaries as well as yet-to-actually-be-paid-out bonuses, of over $8 billion to pay 31,700 employees, equal to $252,366 each. That’s up from $226,006 in the first half of last year.

But Goldman’s bottom line also showed how volatile the business of Wall Street remains nearly five years after the financial crisis, and almost three years after Congress passed landmark financial reform that was supposed to limit the risks that the largest U.S. banks could take. Despite being up from a year ago, nearly all of Goldman’s businesses were down from the first three months of the year, when the company earned $4.29 a share.

That volatility, and the fear that¬†rising interest rates¬†will continue to temper investor activity and hamper deals, appeared to spook investors. Goldman’s shares, which had been up nearly 30% this year, closed down $2.76 to $160.24, following the firm’s morning earnings announcement.

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What’s more, a good portion of Goldman’s profits continue to come from the unit that invests the firm’s own money. Goldman says much of this so-called proprietary trading will still be allowed after the Volcker rule, which is supposed to limit risky trading at the big banks, and other Dodd-Frank reforms are fully implemented. But how much the final rules will curtail these profits is still in question. It also adds, as you would expect and regulators worry, to Goldman’s profit swings.

Revenue from prop trading fell by nearly a third in the second quarter from the first three months of the year to $1.4 billion. But that was up 590% from the $200 million Goldman made from the same business the second three months of 2012.

At the same time, Goldman’s second-quarter earnings also showed how the firm is trying to remake itself into more of a traditional bank. Goldman generated $658 million from lending and debt market transactions. That was nearly triple the $222 million the firm made in the same area a year ago. Goldman, however, declined to detail how much of those revenues were from collecting interest payments, and how much was from bond trading.

Indeed, Goldman’s tight-lipped culture came out in a conference call with investors following the earnings release, creating some contentious moments.

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A number of analysts asked Goldman’s CFO Schwartz about a recently proposed regulation that would require the nation’s largest banks to have available enough capital to cover at least a 5% drop in the bank’s overall assets. Banks with a large amount of deposits might have to hold capital equal to 6% of their assets. JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) have all given rough estimates about what their so-called leverage ratio would be. Some have estimated that Goldman would have to raise as much as $5 billion in order to meet the proposed capital rule.

Schwartz, though, declined to put a number on Goldman’s leverage ratio, only saying he was “comfortable” with what it is.

Credit Agricole analyst Mike Mayo, one of a number of analysts to bring up the new regulation, said, “Comfortable appears to be the word of the day. But what you are saying is trust us we’ll be there, and not disclosing a number that all of your peers have done. On a disclosure basis, you are behind your peers. Can you give us a number that you are above or below?”

“You are looking for shades of grey on comfortable,” Schwartz replied. “I would say pretty comfortable. I’m not trying to be flippant with you.”

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