Did the Paycheck Protection Program Help Small Businesses? Evidence from Commercial Mortgage-backed Securities

Abstract

In this study, we examine the broader economic effects of the U.S. federal government’s Paycheck Protection Program (PPP) by focusing on the performance of securitized commercial mortgages. We provide novel evidence for spillover effects of government interventions in the face of economic crises. We find that the PPP reduced mortgage delinquencies by approximately $36 billion in 2020. The strongest effects occur when PPP funds targeted businesses in areas most affected by COVID-19, where banks overperformed in providing PPP loans, and among mortgages on properties in retail and lodging. Thus, PPP relief to small businesses eased economic distress beyond the labor market.

Keywords: COVID-19, CARES Act, Paycheck Protection Program, Mortgages

JEL Classification: G21, G28, R51, I18