GMATNinja wrote:
Fido10 wrote:
DearGMATNinja , please can you help me on this one !
we could still conclude that insurance partially led to failures whether depositors are able to determine risky banks or not !
why do we, MANDATORY, need to assume that consumers are able to determine which are the risky banks, to conclude that insurance partially led to failures !
Does not the first part of argument sufficient to conclude this conclusion ?
Thanks alot
The argument concludes that the insurance is "partly responsible for the high rate of bank failures." But why? How could an insurance policycause a high rate of bank failures?
Well, according to the economist, the insuranceaffects how depositors choose banks. In other words, the insurancecauses them to ignore whether a bank is likely to fail or not. This reduces banks' incentive to be secure against failure.
Taking that a step further -- according to the argument, if banks aren't pressured by depositors to secure against failure, they
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Statistics : Posted by Contropositive • on 08 May 2008, 11:45 • Replies 28 • Views 71911
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