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The Paycheck Protection Program Liquidity Facility

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Abstract
To bolster the effectiveness of the Small Business Administration’s Paycheck Protection Program (PPP), the Federal Reserve, with the backing of the Secretary of the Treasury, established the Paycheck Protection Program Liquidity Facility (PPPLF). The facility was intended to supply liquidity to financial institutions participating in the PPP and thereby provide relief to small businesses and help them maintain payroll. In this article, the author lays out the background and rationale for the creation of the facility, covers the salient features of the PPP and the PPPLF, and analyzes the facility’s loan take-up. The findings suggest that the PPPLF played an important role in expanding the supply of credit to smaller banks and nondepository institutions and that these institutions were more likely to originate PPP loans to businesses on the smaller end of the scale.

Suggested Citation

  • Desi Volker, 2022. "The Paycheck Protection Program Liquidity Facility," Economic Policy Review, Federal Reserve Bank of New York, vol. 28(1), July.
    • Handle: RePEc:fip:fednep:94438
    Note: This volume is a special issue titled “Policy Actions in Response to the COVID-19 Pandemic,” and features ten articles by New York Fed economists and coauthors from Markets, Supervision, the Board of Governors, and the Boston Fed.
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    References listed on IDEAS

    as
    1. Isil Erel & Jack Liebersohn, 2020. "Does FinTech Substitute for Banks? Evidence from the Paycheck Protection Program," NBER Working Papers 27659, National Bureau of Economic Research, Inc.
    2. Granja, João & Makridis, Christos & Yannelis, Constantine & Zwick, Eric, 2022. "Did the paycheck protection program hit the target?," Journal of Financial Economics, Elsevier, vol. 145(3), pages 725-761.
    3. John Barrios & Michael Minnis & William Minnis & Joost Sijthoff, 2020. "Assessing the Payroll Protection Program: A Framework and Preliminary Results," Working Papers 2020-63, Becker Friedman Institute for Research In Economics.
    4. Haoyang Liu & Desi Volker, 2020. "Where Have the Paycheck Protection Loans Gone So Far?," Liberty Street Economics 20200506, Federal Reserve Bank of New York.
    5. Lei Li & Philip Strahan, 2020. "Who Supplies PPP Loans (And Does it Matter)? Banks, Relationships and the COVID Crisis," NBER Working Papers 28286, National Bureau of Economic Research, Inc.
    6. Erel, Isil & Liebersohn, Jack, 2020. "Does FinTech Substitute for Banks? Evidence from the Paycheck Protection Program," Working Paper Series 2020-16, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Federal Reserve; Paycheck Protection Program Liquidity Facility; PPP; PPPLF; SBA; CARES Act; Federal Reserve lending facilities;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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