The federal government, which owns a chunk of both Bank of America and Citigroup (among others), will see a slice of those revenues. And other profits will likely be used to pay off long-term debts both private and public, which the bailouts banks have accumulated over the past several years.

But news of record profits for bailout companies could have a particular sting for high-level execs whose companies continue to tread water.

Toward the end of June several news agencies reported that Citigroup sidestepped government restrictions on paying out exorbitant bonuses by offering employees exorbitant raises instead (some as high as 50%).  The recent profits have also fueled rampant speculation that bailout corporations might find a way to provide additional year-end bonuses to their employees, despite tight government regulations forbidding them to do so.

Some of the corporations that reported billion-dollar profits during the second quarter, as well as how much federal bailout money each received:

• Citigroup – $4.3 billion ($45 billion in bailout funds)
• Bank of America – $3.2 billion ($55 billion in bailout fund)
• J.P. Morgan – $2.7 billion ($25 billion in bailout funds)
• Goldman Sachs – $2 billion ($10 billion in bailout)

No doubt what’s good for big business is good for the economy. But the question still remains: Did these banks get off too easy?

Are they being rewarded (in a sense) for business practices that helped plunge the U.S. economy into a tailspin? And, if so, do bailout funds give them license to continue some of those practices unchecked (e.g., escalating annual percentage rates in the consumer credit divisions that continue to push default rates higher and higher, irresponsible spending, etc.)? Or should small-business owners see this as a development that will likely have a positive impact for everyone in the months ahead?

We’d love to know what you think. Feel free to share your opinion in the comments section below.

Source: “Bailed-out banks turn second quarter profits,” by Joseph Weber, The Washington Times, 7/18/09.