Feels very plausible to me; also a great exercise for “Spot who is paying for what risk in this scenario.” https://twitter.com/bitfinexed/status/931003306473910272 …
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The bank then immediately pockets spread between loan APR and CD APY, and this is generally 5%+, with functionally zero default risk.
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Note that "functionally zero" is not "0%." There are sequences of events which can result in the bank losing money; that's a major reason why the APR is not trivially higher than the CD rate.
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Examples: divorce decree moves the CD to a spouse but does not reassign the debt. Other debt causes bankruptcy; if filed before the bank exercises their rights against the CD, this can result in filer or another creditor getting the money and/or discharge the debt part.
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End of conversation
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