Working Paper

A Tale of Two Bailouts: Effects of TARP and PPP on Subprime Consumer Debt

Abstract: High levels of subprime consumer debt can create social problems. We test the effects of the Troubled Asset Relief Program (TARP) and Paycheck Protection Program (PPP) bailouts during the Global Financial Crisis and COVID-19 crisis, respectively, on this debt. We use over 11 million credit bureau observations of individual consumer debt combined with banking, bailout, and local market data. We find that subprime consumers with more TARP institutions in their markets had significantly increased debt burdens following these bailouts. In contrast, PPP bailouts were associated with reduced subprime consumer debt. Findings are robust to addressing identification concerns, and yield policy implications regarding bailout structures and strings attached to bailout funds.

Keywords: Household Debt; Subprime Consumer Debt; Banking; Bailouts; TARP; PPP; Financial;

JEL Classification: G01; G28; D10; D12; E58;

https://doi.org/10.21799/frbp.wp.2021.32

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2021-09-23

Number: 21-32