Corporate Welfare Friday

(Update includes earnings results for General Electric, Bank of America and General Electric.)

Three troubled corporate titans reported earnings Friday morning, after using an expanse of government support to plug balance-sheet holes, leverage earnings power or boost investor confidence enough to operate in the financial markets.

Bank of America ( BAC), Citigroup ( C) and General Electric ( GE) have received varying degrees of federal support throughout the economic crisis. But all three can't deny -- like most companies with big financial components over the past 10 months -- they have received some form of handout. That's why we're dubbing today Corporate Welfare Friday.

All three firms topped earnings estimates on Friday, collectively reporting $10.4 billion in profit. It's worth noting how much government support BofA, Citi and GE were able to lean on to boost results.

BofA and Citi have received $90 billion in bailout funds from the government's Troubled Asset Relief Program, not including yet-to-be-valued warrants. They have also taken advantage of $12.5 billion in asset guarantees and nearly $70 billion in Federal Deposit Insurance Corp. guarantees on new debt issued through the first quarter.

What the Fed: Corporate Welfare Friday

Citi outlined nearly $30 billion in FDIC backing on its commercial paper and interbank deposits as well, along with another $7 billion in FDIC guarantees in the first portion of the second quarter. BofA said it has used other short-term FDIC guarantees, the Treasury's money market guarantees, and several discounted lending programs from the Federal Reserve, but did not disclose the amount.

The only company that has received more explicit government support than BofA is zombie insurer American International Group ( AIG), of which the government owns 80%. General Motors, which went bankrupt, and Freddie Mac ( FRE), the zombie mortgage-finance giant, have also received more direct support than Citi. (Those rankings are based just on capital injections and asset guarantees.)

BofA's fellow Dow component General Electric hasn't leaned quite so heavily on government support. But then again, most people don't think of GE as a bank.

But while GE may not have accessed TARP funds, the FDIC has made $126 billion in guarantees available to it on new debt issuance. The firm is heavily reliant on that support to function in the capital markets.

GE's financing division, GE Capital, has caused much consternation, forcing the firm to slash its dividend by more than two-thirds to 10 cents per share in February. It also caused GE to lose its pristine triple-A credit ratings, on concerns that the financing arm issues, combined with a slowdown in industrial demand, make its debt less safe.

Of course, holding a double-A rating is not terrible in the current environment. (Even Warren Buffett's Berkshire Hathaway ( BRK-A) and the entire United Kingdom lost their AAA ratings earlier this year.) But GE is so plagued by concerns that its profitability will be hindered, and that the rating could be slashed further , that investors shied away from GE bond issuances, or demanded much higher premiums.

As a result, the FDIC stepped in to offer up to $126 billion worth of guarantees on GE paper, essentially saying that Uncle Sam would step in if the firm couldn't make good on its promise to repay. Through March 31, GE had issued $74 billion worth of debt protected by the Temporary Liquidity Guarantee Program, apparently more than BofA and Citi combined. It's certainly more protection than smaller competitors like CIT Group ( CIT) were offered.

CIT, which did receive $2.3 billion in TARP funds, said n Thursday that talks with government broke down and it will not receive FDIC debt backing or other support in the near-term. The company is now on the brink of bankruptcy.

Such a wide government safety net either implies that BofA, Citi and GE may be too troubled to make it on their own, but are still using the added leverage to post rock-star profits. The outcome may not be surprising, but investors ought to question what the results would have been if taxpayer dollars weren't a factor.

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