Can credit union and coop banks replace traditional banks completely?
Edit (adding additional question): Has there been an attempt to do this on a national or societal level?
Can credit union and coop banks replace traditional banks completely?
Edit (adding additional question): Has there been an attempt to do this on a national or societal level?
I’m not saying you’re wrong, just expressing my confusion: Don’t CUs also provide loans? Isn’t that their primary purpose?
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.
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. Your shares are the dollars in your account, the interest gained is the returns from loans.
These have to be guaranteed by someone, either the NCUA or another CU or bank. In fact, you can go to a Credit Union that doesn’t insure via the NCUA. I wouldn’t recommend it.