Our Timid Government Is Killing Us

This column was written by Michael Kao, CEO and portfolio manager of Akanthos Capital Management, a hedge fund specializing in convertible, capital structure and event-driven arbitrage strategies.

So far, we have seen expanded Term Auction Facilities, a $700 billion rescue package and global rate cuts. So why are all asset markets still falling? Simple. Given the recent severe violations of market trust and the basic sanctity of capitalistic conventions, the U.S. government still has done little to repair the damage dealt over the last several weeks.

Two weeks ago, I wrote an article called "Four Ways to Help Us Out of This Crisis," in which I outlined four basic issues and four suggested solutions. To briefly summarize, the four issues were:

1. The "bailout" of Fannie Mae (FNM Quote) and Freddie Mac (FRE Quote) by the Treasury also simultaneously eviscerated a multi-hundred-billion-dollar market for preferred securities; ...