The government provides insurance

Answer choices

1. A

   Out of Scope: default-insurance10% picked this

   Banks are not insured by the government against default on the loans

   This is unrelated to the argument, which is concerned with who should bear the cost of deposit insurance rather than loan defaults.

   10%
2. B

   Out of Scope: private insurance companies4% picked this

   Private insurance companies do not have the resources to provide banks or individuals

   Whether or not private insurance companies can provide deposit insurance isn't relevant to the argument about who should pay for the existing government-provided insurance. The fact that the government currently provides the insurance doesn't imply that private insurance companies couldn't do so.

   4%
3. C

   Correct65% picked this

   Banks do not always cover the cost of the deposit-insurance premiums by paying depositors lower interest rates on insured deposits than the

   Why this is right

   This has the lovable Defender "not", so we want to negate it and see if this would weaken. If banks DO always cover insurance costs by reducing depositor interest rates—then the argument's suggestion that depositors need to bear the costs becomes irrelevant because they already do, indirectly. There would be no reason to switch who pays for the premiums, since the premiums are not currently costing the banks any money. They found a way to cover the cost by giving customers less money back as interest on their accounts.

   Skill tested: Necessary Assumption · how this choice captures the argument's function is the move to repeat next time.

   65%
4. D

   Out of Scope: defined limit3% picked this

   The government limits the insurance protection it provides by insuring accounts up to a certain

   This is an outside knowledge trap because many people probably know that the FDIC insures accounts up to $100k (pre-pandemic, I think it increased to $250k, at some point). It doesn't make any difference to this argument whether the insurance protection is limited or unlimited. In either case, the banks are currently paying the premiums and the author thinks the depositor should be paying them.

   3%
5. E

   Opposite (if anything)18% picked this

   The government does not allow banks to offer some kinds of accounts in which deposits

   This does have a lovable "not". If negate it, it's saying "the government does allow for banks to offer accounts that aren't insured". Does that weaken? No. The author seemed to actually be allowing for that possibility when he said, "depositors who want this security". That suggests that having the insurance is an option, not a given. If banks are allowed to offer uninsured accounts, that's fine. Those are beyond the scope of this argument. This argument is about accounts that do have insurance, and is arguing that for those types of accounts, which come with insurance premiums, depositors rather than banks should pay the premiums.

   18%