Bank Depositors in the United States are all financially

[GMAT 2007]

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 bank failures, since it removes from the depositors any financial incentive to find out whether the bank that holds their money is secure against failure. If depositors were more selective, then banks would need to be secure in order to compete for depositor's money.

The economist argument makes which of the following assumptions?

(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 the 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.

The correct answer is (E). But (D) & (E) both were appealing to me. I feel (D) to be a possible choice because - What if the depositor deliberately deposits the money in the insecure banks because of better interest rate offered by those banks.

Also please confirm in th case if (E) is the case to establish the feasibility of the premise of the argument?

Thanks
GMAT 2007

[StaceyKoprince]

D might be tempting if it said what you said:
"What if the depositor deliberately deposits the money in the insecure banks because of better interest rate offered by those banks. "

But what it actually says is:
"The difference in the interest rates paid to the depositors by different banks is not a significant factor in bank failures. " Not why / whether the depositor chooses the bank - but why / whether the bank itself fails. This then fails to connect to the argument's conclusion, because the conclusion hinges on the depositor being more selective - but this choice doesn't actually address the depositor's behavior.