Critical Reasoning

Bank depositors in the United States are all financially protected against bank failure because the government insures all individuals' bank deposits. An economist argues that this insurance is partly responsible for the high rate of bank failures, since it removes from depositors any financial incentive to find out whether the bank thatholds their money is secure against failure. If depositors were more selective, then banks would need to be secure in order to compete for depositors' money.

A. Bank failures are caused when big borrowers default on loan repayments.
B. A significant proportion of depositors maintain accounts at several different banks.
C. The more a depositor has to deposit, the more careful he or she tends to be in selecting a bank.
D. The difference in the interest rates paid to depositors by different banks is not a significant factor in bank failures.
E. Potential depositors are able to determine which banks are secure against failure.

I read the explanation for this question posted earlier in the forum. However, I am unable to understand the structure of this argument. Can anyone state the conclusion, premise and how assumption fits in for this argument.

Thank you.

From what I can tell:

The conclusion is the last sentence. The author is stating that if depositors were more selective with where they deposit their money, the banks would be required to compete for customers (the depositors' money), therefore they would be more secure.

The evidence is the first two sentences. The first sentence states that bank depositors are financially protected from all failures because the government insures each bank deposit. The second sentence states an economist's argument as evidence - it says that this insurance is a partial cause of these bank failures because the depositors' do not have a financial incentive to take the time to find out if the banks are secure or not (or in the conclusion's terms - customers do not have a financial incentive to be selective).

The assumption in this passage is that if banks were not federally insured by the government, customers would find out whether the bank that holds their money is secure against failure, and therefore become more selective with their choice of banks.

Dear CappyAA,

Thanks for the reply. In choice E, "Potential depositors" is mentioned. Isn't this bit misleading. Shouldn't this be generalized as depositors.

Where is the question for this argument?

When I posted, I didn't see the answer choices so I was just guessing what an assumption could be. But I think E fits the bill for an assumption the author is making here.

The "potential" part just means that these are customers that haven't yet made a deposit. The assumption is that anyone who is looking to deposit money in a bank is able to tell if a bank is secure or not.

But along with what sl750 said, it's hard to figure out the answer without a question.

Sorry, copy-paste mistake. The question is to find the assumption

What is the OA?

Thanks
Mankey

OA is E