What would be actual consequences if banks (or other large companies) weren’t bailed out by the government. Would financial crashes be worse?
In: Economics
Banks hold a bunch of people’s money. If a bank fails and especially if a bunch of banks fail, there is a risk that people lose trust in banks to hold their money and run to their bank to take out all their money. That can cause a really big collapse, since banks don’t actually keep people’s money sitting there (they lend it out). If banks don’t have money they can lend out, a lot of industries will struggle, since buying homes, building commercial buildings, and a lot of other major industries rely on bank loans.
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