Morgan Stanley's ( MWD) fourth-quarter earnings report had investors smarting, but the pain might have been worse if the company had been more conservative in some of its accounting decisions. The best-performing division at Morgan Stanley in the last quarter was its Discover credit card business, which posted $194 million in net income, a 1% gain over last year. But a good deal of Discover's performance is due to a potentially risky decision by Morgan Stanley to set aside less money in a quarterly reserve account to cover defaults by consumers on their credit card bills. And that's a move that could come back to haunt the brokerage if the economy worsens and Discover borrowers can't pay their bills. Indeed, some financial analysts say that given the uncertain economic climate, now is not the time for Morgan Stanley to be lowering its reserves. But they say the nation's second-largest brokerage may be taking that gamble to offset the weak earnings reported by its retail brokerage and investment banking divisions. "It's somewhat surprising," said Sean Eagan, president of Egan-Jones Ratings, a small corporate credit rating agency. "It's contrary to the experience of other players in the credit card industry. A high level of skepticism is needed." In the fourth quarter, Morgan Stanley set aside $319 million for credit card loan losses, 4% less than in the third quarter and 3% less than the year-ago period. Now a sequential reduction of 4%, or $13 million, may not sound like much, but every dollar a credit card lender doesn't put into this particular account goes toward fattening its bottom line. And this quarter, Morgan Stanley clearly needed all the help it could get in presenting the best face to investors. Overall, the brokerage reported net earnings of $732 million, or 67 cents a share, a figure that includes a $235 million restructuring charge due to job cuts and real estate losses. On an operating basis, the firm reported earnings of 81 cents a share, a number that exceeded the 75-cent consensus estimate of most Wall Street analysts.