Whose Bailout Is It Anyway? Political Connections of Small Businesses vs. Banks in PPP Bailouts
58 Pages Posted: 16 Sep 2021 Last revised: 17 Sep 2022
Date Written: September 16, 2021
We investigate political connections for the over one-half-trillion-dollar Paycheck Protection Program (PPP). We test partisan and nonpartisan political connections of both businesses and banks in the program, investigate the mechanisms for these connections and provide evidence on bank benefits and their channels. Our results suggest banks exercised partisan political connections, influencing funding through lobbying, whereas nonpartisan connections helped small businesses via congressional representatives on a powerful committee. We also find banks profited through multiple channels, complement existing literature findings that small businesses significantly benefitted. Thus, PPP effectively bailed out both banks and small businesses, but through different connections and mechanisms.
Keywords: Political Connections, Political Economy, Bailouts, Paycheck Protection Program (PPP), Small Businesses, Banks, COVID-19 Crisis
JEL Classification: G01, G21, G28, D72
Suggested Citation: Suggested Citation