US banks should be allowed to take a hit from risky investments if the free market is to be preserved, Sean Corrigan, chief investment strategist at Diapason Commodities Management, told CNBC Monday.
"The privileged few clustering around the Treasury Secretary and the Fed have eaten everybody else's lunch," Corrigan said.
Federal Reserve Chairman Ben Bernanke said on Thursday that another round of quantitative easing was not imminent, after the second round was completed.
Corrigan believes that there will eventually be another round of quantitative easing, but not until after the worst of the economic gloom has passed.
Standard & Poor's warned last week that it may cut the US debt rating as prolonged discussions in government failed to find a resolution over the debt ceiling issue.
One key sticking point lies in raising taxes on higher earners, which many Republicans object to.
"If you want to preserve some kernel of the free market, you can't have corporate welfare socialism and then expect all the austerity to fall at the bottom of the pile," Corrigan said.
"This is supposed to be a free market where informed investors take decisions to invest their capital and when the capital risk backfires they have to pay for it," he added.
On Sunday, White House budget director Jack Lew said there had been "activity and progress" in efforts to conclude to raise the debt ceiling.
Some Republicans, including Michelle Bachman, one of the party's potential Presidential candidates, have vowed to vote against raising the debt ceiling.
"We know that the burden of debt payment is almost certainly unpayable under the current structure," Corrigan said. "We can only presume that efforts are being made, although we can't always approve of the direction they are taking."
The bailout of many of the US banks in the wake of the credit crisis, after Lehman Brothers had collapsed, was misguided, he believes.
"If a bank goes bust, its assets will fall into stronger hands," he said.
"These are pretty deep global markets, and there are trillions of dollars in the world, with lots of people looking for an investment opportunity. Give them one."