What question did this study set out to answer?

This research evaluates how different restrictions on government aid affect subprime consumer debt levels.

February 20, 2026

A Tale of Two Bailouts and Their Impact on Subprime Consumer Debt

Key Points

This research evaluates how different restrictions on government aid affect subprime consumer debt levels.
Compared TARP and PPP programs using quasi-natural experiments
Analyzed millions of consumer debt observations from the Consumer Credit Panel
Assessed the impact on subprime borrowers under each program
PPP significantly reduced debt for subprime borrowers
Reduction in debt primarily occurred through income shock mechanisms
TARP was associated with an increase in debt due to credit shocks

Abstract

Abstract We address how different restrictions or “strings” attached to the usage of government aid distributed through banks during crises affect subprime consumer debt. Leveraging quasi‐natural experiments, we compare Troubled Asset Relief Program (TARP), characterized by limits on executive and shareholder compensation but no strings attached to lending with the highly restrictive Paycheck Protection Program (PPP) loan requirements but no limits on executives and shareholders. We evaluate the programs’ impacts on millions of consumer debt observations from the Consumer Credit Panel. Results indicate that the PPP funds significantly reduced debt for subprime borrowers, primarily through income shock mechanisms, compared to additional debt through credit shocks under TARP.

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Cite This Study

Berger et al. (Tue,) studied this question.

synapsesocial.com/papers/6997fa6dad1d9b11b3453914 https://doi.org/https://doi.org/10.1111/jmcb.70010

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