Tarogar@feddit.de 4 months ago
Real scenario: you wouldn’t see that happen.
Hypothetically it could cause economic collapse because now there wouldn’t be money to back up all the loans that are outstanding. Followed by mass layoffs of people and all the other fun stuff that comes with it.
Nemo@midwest.social 4 months ago
I’m not saying you’re wrong, just expressing my confusion: Don’t CUs also provide loans? Isn’t that their primary purpose?
Blue_Morpho@lemmy.world 4 months ago
It’s the idea that bank A wrote a loan and is required by the government to maintain a small amount of cash to back that loan. So if all the money goes to Credit Union B, Bank A would be declared insolvent.
However that wouldn’t cause any economic collapse. Banks bundle and sell off their loans all the time. If Bank A no longer had deposits to cover a loan, they’d sell the loan to Bank B who did.
KingThrillgore@lemmy.ml 4 months ago
CUs will issue anything that can help their maintain the required returns on the owners of shares (read: you). They can issue loans, but because they are not issuing on speculation but on a clear expectation of a return to the owners of the shares (read: you) they cannot loan as much.