The Paycheck Protection Program Liquidity Facility (PPPLF): Background, Features, and Loan Take-Up

Summary

Abstract of a Federal Reserve Bank of New York study of the Paycheck Protection Program Liquidity Facility (PPPLF), which the Federal Reserve, with the backing of the Secretary of the Treasury, established to supply liquidity to financial institutions participating in the PPP. The authors lay out the background and rationale for the facility, cover the salient features of the PPP and the PPPLF, and analyze the facility's loan take-up. Their findings suggest the PPPLF played an important role in expanding the supply of credit to smaller banks and nondepository institutions, which were more likely to originate PPP loans to businesses on the smaller end of the scale. The paper was prepared for the Economic Policy Review and a New York Fed conference on Federal Reserve actions in response to COVID-19.

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Full text

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, we lay out the background and rationale for the creation of the facility, cover the salient features of the PPP and the PPPLF, and analyze the facility’s loan take-up. Our 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. This paper was prepared for an upcoming issue of the Economic Policy Review and a related New York Fed conference, “Implications of Federal Reserve Actions in Response to the COVID-19 Pandemic.”

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The Paycheck Protection Program Liquidity Facility — Federal Reserve Bank of New York Staff Reports, no. 978

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www.newyorkfed.org