Who Supplies PPP Loans (and Does It Matter)? Banks, Relationships, and the COVID Crisis

Abstract

as well as participants and our discussant Lawrence Schmidt at the TAU Conference on Financial Intermediation during the COVID-19 Crisis.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Optimal Allocation of Relief Funds: The Case of the Paycheck Protection Program

“…Moreover, banks favored firms with closer relationships to the bank rather than those in greater distress. A similar conclusion regarding lending relationships is reached by Li and Strahan (2020) and Amiram and Rabetti (2020), who investigate the connection between bank-firm relationships and access to PPP loans. 5 Our contribution to this literature is twofold.…”

“…This connects our theoretical results to empirical studies on the importance of bank relationships to the allocation decisions of banks, such asLi and Strahan (2020) andAmiram and Rabetti (2020).…”

A socio-economic multi-objective optimization approach toward enhancing public–private partnerships’ concession agreements in infrastructure development

“…These attempts have been conducted to optimize one aspect or another in the PPP implementation development. However, most of the studies focused only on one or two variables to optimize, while PPP projects have many variables, which differ from one another (Huang et al, 2021; Li and Strahan, 2021). Besides, optimizing one variable alone may reduce the optimal values for the other variables due to the interdependencies among the concession components.…”

The Paycheck Protection Program Liquidity Facility

“…By originating and holding PPP loans on their balance sheet, banks could potentially be exposed to increased regulatory capital requirements. 9 While the CARES Act specified that PPP-covered loans originated by a banking organization would carry a zero percent risk weight and thereby not affect their risk-based capital requirements, PPP loans held on a bank's balance sheet could potentially affect the bank's leverage-based regulatory capital requirements and their liquidity coverage ratios (LCR). To alleviate this issue and incentivize lender participation, the regulatory agencies (Fed, OCC, FDIC) further specified that PPP loans and the lines of credit extended under the PPPLF would be exempted from entering calculations from all regulatory capital requirements of banks and bank holding companies, including risk-based and leverage-based capital and for LCR purposes.…”

“…The fee reimbursement was to be made no later than 5 days after the disbursement of the covered loan 9. Lenders could request that the SBA purchase the expected forgiveness amount of the PPP loan or pool of loans at the end of week 7 of the covered period of an originated PPP loan, but before that date, the lender has to either hold the loan on their balance sheet or sell it in the secondary market.…”