Lessons From TARP for Implementing the Coronavirus Stimulus Package

When you’re asked to start a job on a Sunday, you should expect to be coming into a crisis. 

That’s what I experienced during the last major economic crisis, when I joined the Department of the Treasury to help administer the Troubled Asset Relief Program (TARP), starting on a Sunday in 2008. TARP was created late that year to stabilize our financial system, protect the savings of millions of Americans and make sure that the Great Recession didn’t become another Great Depression. I was reminded of those frenetic days this week as the Paycheck Protection Program (PPP) went online.  

If I learned one lesson from helping run the TARP from 2008-2011, it is that execution matters. One of the TARP architects used to say that our policy would be debated for eternity, but he was determined that no one would ever question our execution. Pundits might debate TARP’s merits, but no one can doubt that the program met its goals. Our country avoided further financial meltdown, taxpayers were repaid more than the program disbursed, and the economy enjoyed over a decade of growth.

The success or failure of the Paycheck Protection Program, a key component of the most recent $2 trillion coronavirus stimulus package, now depends on the federal government’s execution of the law. The administration must make sure that the program can be scaled up to meet incredible demand. Lawmakers in both parties should be prepared to provide additional funding to the program if needed. If not, too many mistakes will be made and not enough businesses will be able to benefit, hurting all of us.   

We’ve seen echoes of 2008 in the last month, down to Speaker Pelosi and a Republican president finding consensus on a legislative package. PPP has featured an even more accelerated timeline than TARP. On launch day, PPP exposed a number of kinks, and it has reminded me again that the most carefully constructed program and policies will fail without an unrelenting focus on perfect execution. I’ve seen it happen.

This does not mean that some mistakes will not be made. Overall, one of the reasons TARP worked was that leadership at the Treasury and in Congress continued to adapt and improve the program. I remember one small $3 billion reporting error that made it through an army of financial whiz kid reviews, only to be caught by an IRS lawyer with a professed aversion to Excel. To limit mistakes, there must be complete dedication to quick and accurate execution of the policies that are chosen, and streamlined review processes in place. Critically, the review processes must truly add value, rather than checking a bureaucratic box. This is one of the most important challenges facing any institution, whether it’s in the private sector or a government agency. 

The PPP rollout has clearly been challenging, both to small businesses and the thousands of community banks who want to participate and support their communities. The final terms were published on Thursday evening for a program that went live on Friday, and small businesses have been searching for answers as to whether they qualify and if so, for how much, and banks have been scrambling to put application processes in place. Of the largest banks, only Bank of America was live on Friday morning announcing that it had $6 billion in applications by mid-day. So we know that the demand for the program is massive. Congress should commit now to making more funds available to small businesses through this program if the demand continues at this breakneck pace.

Small businesses are searching to find banks that are actually taking applications right now, only to discover that the wiring of the program — the execution — is still being built. Huge demand, immediate urgency, and a program being assembled quickly has been a recipe for anxiety nationwide: small business owners are worried that funds will run out before they can even figure out the rules, find a place to apply, and get their well-deserved turn. 

Community banks are working nonstop to figure out how to help their Main Street customers. Those who were already active Small Business Administration lenders seemed to have a head start; others are trying to make sure they can access and submit the correct form. Some community banks are partnering with fintechs to process and fund all of their customer’s loans; others are working to build new online applications to help their borrowers submit applications or scaling up existing programs. 

Realistically, with limited resources for processing applications, many lenders are focusing on existing customers first. But the need will be larger than that: the program is intended to serve a broader base of customers through a much larger network of lenders so that the needs of the country are met, and borrowers who haven’t previously had a need for loans shouldn’t automatically find themselves at the back of the line. 

One of the biggest sources of frustration facing the public right now, is that borrowers can’t figure out how to complete the application correctly and that the SBA channels seem to be overloaded from a technology standpoint, preventing banks from getting the necessary approvals to fund loans. SBA and the Treasury need to make sure that the websites involved can handle the avalanche of applications that are coming in a secure and efficient fashion. We’ve seen government websites struggle at launch but also eventually be capable of meeting demand. They can get it done, but things need to get better to make sure that there is a level playing field for all applicants and lenders. 

The goals of the Paycheck Protection Program are laudable. Every single one of us already knows businesses in our community that are on the brink, endangering jobs, livelihoods, services and products that enrich our lives and our economy. The policy is set; now it comes down to execution. Just as lenders are working overnight to build new capacity, scale up their operations and serve their customers, the government will also have to adapt. Millions of jobs, and the stability of households across our country, depend upon it. 


Lori Bettinger is the president of BancAlliance, a network of over 250 community banks. Prior to her role at BancAlliance, Lori served as the director of the TARP Capital Purchase Program at the Department of the Treasury.

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