During the election season, many thought that the New York Times -- a liberal, left-leaning publication and staunch critic of the Bush Administration -- would become the economic mouthpiece of the incoming Obama Administration. What has happened, though, is that the New York Times -- especially Paul Krugman -- has turned into a chorus of concerned voices, alerting the broader public to economic policy moves that just don't make sense. Last week, Newsweek even featured Paul Krugman on the cover as the "loyal opposition" and "toughest liberal critic" of Barack Obama's economic approach.

On Tuesday, Andrew Ross Sorkin of the Times weighed in with a hyper-critical look at the way that the Obama Administration is using the myth of "risk-free investing" as a cover for massively increasingly the scope of what the FDIC is supposed to be doing. The FDIC is supposed to insure bank deposits of ordinary, everyday Americans, and has a mandated authority to do that to the tune of $30 billion. Under the new Public-Private Investment Program, however, the FDIC could be on the hook for close to $1 trillion in toxic assets. Under a number of convenient fictions and wavings of the magic economic wand, the FDIC is forecasting "no net losses" -- repeat, "no net losses" -- on the little bailout of toxic assets for the banks.

The bottom line is that the FDIC just might be " elbowing its way into the middle of the financial mess as an enabler of enormous leverage." Instead of reducing risk to the financial system, the FDIC just might be encouraging bankers to take more risk -- and have that risk at least partially subsidized by American taxpayers. A big hat tip to the New York Times for taking the time to read the fine print.

[image: Economic Briefing via Whitehouse.gov]