Question

Banker: My country’s laws require every bank to invest in its local community by lending money to local businesses, providing mortgages for local home purchases, and so forth. This is intended to revitalize impoverished local communities. But it is clear that the law will soon entirely cease to serve its intended purpose. An increasing number of banks incorporated in our country exist solely on the Internet and are not physically located in any specific community.

Option A
Option B
Option C
Option D
Option E

(This question is from Official Guide. Therefore, because of copyrights, the complete question cannot be copied here. The question can be accessed at GMAT Club)

Solution

The Story

Banker: My country’s laws require every bank to invest in its local community by lending money to local businesses, providing mortgages for local home purchases, and so forth.

The banker says that his country’s laws require every bank to invest in the bank’s local community by doing (1) lending money to local businesses, (2) providing mortgages for local home purchases, or (3) other things. This is a straightforward fact about a current legal requirement in the country.

This is intended to revitalize impoverished local communities.

This requirement to invest in local communities is intended to revitalize impoverished local communities. Even though the requirement seems to apply to all the local communities, it is intended to help impoverished communities. Also evident here is that this statement mentions a goal, and the previous statement talked about a currently active plan to achieve the goal.

But it is clear that the law will soon entirely cease to serve its intended purpose.

There is a change in direction here. The banker makes a claim that the law will soon ‘entirely stop’ to serve its intended purpose. (Okay, that’s a huge claim. How can he say so? He’ll probably go on to tell us.)

An increasing number of banks incorporated in our country exist solely on the Internet and are not physically located in any specific community.

This line supports the previous line. Impoverished local communities will stop getting helped by the law because an increasing number of banks do not physically exist in any community. (So, the law will not require these banks to help any specific community).

Gist: The country’s laws require banks to invest in local communities in order to revitalize the poor ones. However, since more and more banks exist only online (support), the laws will entirely stop helping revitalize the poor local communities (conclusion).

The Gap

How will the existence of more and more banks solely online lead to completely stopping the laws from helping revitalize the poor communities?

Clearly, the banker makes the following assumptions:

1. Physical-banks will cease to exist
2. Purely-online banks are not covered under the laws

Let’s examine these assumptions:

If the banker did not believe that the physical-banks will cease to exist, could he conclude that the law will entirely stop revitalizing poor communities? No.

Similarly, if the banker believed that purely-online banks are also required by law to help revitalize the communities, would he give more such banks existing as the reason for his conclusion? He wouldn’t.

The argument fails to consider these scenarios.

The Goal

We have to find an option that indicates a flaw in the argument. We already discussed two scenarios the argument fails to consider. Of course, there could be other scenarios that the argument has failed to consider. We have come up with only two. Doesn’t mean that there are only two such scenarios.

The Evaluation

(A) Incorrect. Let’s first understand the possibility that this option talks about, and then we can see whether it’s a flaw in the argument that it overlooks such a possibility. The possibility is that most banks catering to specific communities are not catering to impoverished communities. Given that we know that the intended purpose of the law was to help impoverished communities, this possibility indicates that most banks catering to specific communities are already not serving the intended purpose of the law. However, some banks may be serving the intended purpose.

Moreover, even if we assume ‘most banks’ implies all such banks are not located in impoverished communities, that would tell us that the law is presently ineffective. 

This possibility clearly doesn’t go against the banker’s argument. Thus, overlooking this possibility cannot be a flaw in the banker’s argument.

(B) Incorrect. The argument’s conclusion is: “the law will soon entirely cease to serve its intended purpose”. Thus, whether the law served any beneficial purpose other than the intended purpose is not relevant to the argument. Thus, this option cannot be a flaw in the argument.

(C) Incorrect. While we can reject this option directly since there is no confusion around different causes or cause and effect in the argument, let’s try to understand the meaning of the statement for the sake of learning.

The option says that the argument confuses an ‘X’ condition with a ‘Y’ condition.

X: a condition that would, if present, be likely to produce a given effect (i.e. if X is present, it’ll likely produce Z)
Y: a condition that would probably be the cause if that effect were present (i.e. if Z is present, Y is likely to be the cause of it)

The option says that the argument is confusing X with Y. However, the argument is talking about neither X leading to Z nor Y being the cause of Z.

(D) Incorrect. Since the argument doesn’t talk about any correlation and causation, this option is completely off. Even if we take the two phenomena to be (1) banks being physically present in local communities and (2) laws helping revitalize impoverished communities, the argument never discusses correlation or causation in their regard.

(E) Correct. This option is in line with the first gap we identified in the argument. The argument fails to address or consider the possibility that some non-internet banks may continue to exist or that an increase in internet banks will not lead to the complete elimination of non-internet banks that exist in specific communities. In this possibility, the argument ceases to hold since the law will not cease to serve its intended purpose.

Additional Notes

This argument follows a very common CR argument structure. The argument starts with mentioning an existing situation/ a trend/ a widely-held belief. The argument then concludes that what’s given in the previous statement is either not valid or will not remain valid. And then the author presents reason(s) for why that is so.

Here’s a similar official question. 

SC Notes: 

The use of ‘this’ in the second sentence without a noun following it. ‘this’ refers to the entire first sentence. 

Option D says “neither of those phenomena are…”. The use of a plural verb with ‘neither’ is informal, if not downright wrong.

If you have any doubts regarding any part of this solution, please feel free to ask in the comments section.