Publications
Did FinTech Lenders Facilitate PPP Fraud?
(with John M. Griffin and Samuel Kruger)
Journal of Finance, 78: 1777-1827 (2023)
In the $793 billion Paycheck Protection Program (PPP), we examine metrics related to potential misreporting including non-registered businesses, multiple businesses at residential addresses, abnormally high implied compensation per employee, and large inconsistencies with jobs reported in another government program. These measures consistently concentrate in certain FinTech lenders and are cross-verified by seven additional measures. FinTech market share increased significantly over time, and suspicious lending by FinTechs in 2021 is four times the level at the start of the program. Suspicious loans are being overwhelmingly forgiven at similar rates to other loans.
Cited by U.S. House Committee Report on PPP Fraud
Media Coverage: New York Times, Bloomberg, USA Today, National Public Radio, Washington Post, Atlanta Journal-Constitution, Miami Herald, CNN, NBC News, Fox News, and over 200 others.
Working Papers
Did Pandemic Relief Fraud Inflate House Prices?
(with John M. Griffin and Samuel Kruger)
Pandemic fraud is geographically concentrated and stimulated local purchases with effects on prices, particularly for housing. Fraudulent PPP loan recipients significantly increased their home purchase rate after receiving a loan compared to non-fraudulent PPP recipients, and house prices in high fraud zip codes increased 5.7 percentage points more than in low fraud zip codes within the same county, with similar effects after controlling for other explanations for house price appreciation during COVID. Zip codes with fraud also experience heightened vehicle purchases and consumer spending in 2020 and 2021, with a return to normal in 2022.
Media Coverage: Wall Street Journal, Associated Press, National Public Radio, CNBC, Fox Business.
Is Fraud Contagious? Social Connections and the Looting of COVID Relief Programs
(with John M. Griffin and Samuel Kruger)
Fraud indicators in the Paycheck Protection Program (PPP) COVID relief program are highly geographically concentrated. Areas with high PPP fraud also have heightened indicators of suspicious Economic Injury Disaster Loan (EIDL) Advances and unemployment insurance claims. Zip codes and counties with high rates of suspicious PPP loans exhibit strong social connections to one another with evidence of fraud spreading over time through social connections. Additionally, individuals in suspicious social media groups have higher rates of PPP fraud, and socially connected zip codes frequently use the same specific FinTech lenders and EIDL agents, consistent with social connections influencing detailed loan decisions.
Is Auto ABS a Vehicle for Misreporting?
Using data on over 10 million auto loans from 144 auto asset-backed security (ABS) deals, I find signs of misreporting that are consistent with those found in other forms of ABS (such as RMBS and CMBS). Borrowers/dealers are inflating book values of vehicles to lower LTV and overstating income to lower PTI and DTI. Loans immediately below discrete LTV and credit score cutoffs are found to be riskier. The misreporting is partially priced at the loan-level in the form of higher interest rates, but investors do not appear to be compensated for the added risk at the deal-level. Additionally, by employing a quasi-natural experiment, I find preliminary signs that government programs masked loans with misreporting during the COVID-19 pandemic.