Whose Bailout Is It Anyway? Political Connections of Small Businesses vs. Banks in PPP Bailouts

Economic agents pursue government funds using political connections, but it is sometimes unclear which types of connections and whose connections matter, and which agents have opportunities to benefit. We address these issues for the over one-half-trillion-dollar Paycheck Protection Program (PPP). Partisan political connections appear influential only for banks, nonpartisan connections work only for small businesses. Banks, rather than small businesses, had direct opportunities to apply for PPP funds. Banks benefited from higher profitability due to increased lending and competitive advantages, while existing research finds small businesses benefited. Thus, PPP bailed out both banks and small businesses, but through different connections.