Editor’s Note: Our favorite trading guru Bill King of M. Ramsey King Securities was on Fox Business News Tuesday. Because he had the audacity to tell the talking heads they were wrong he got cut short. You can view the clip at:

http://www.foxbusiness.com/video/index.html

Bill understandably was agitated after his appearance. He fires off this heat-filled invective against the proposed bailout plan.

Amidst the hub-bub, Congressional hearings, and countless discussions pertaining to the proposed Bailout Bill, no one has ever bothered asking Bernanke and Paulson the SINGLE most important question:

How much crappy paper is out there?

If we’re going to start talking about fixing the problem, we need to have some understanding of its extent. If you can’t quantify the amount of crappy paper, you shouldn’t get access to tax-payer money. It’s as simple as that. No venture capitalist or businessman on the planet would write a blank check to a business proposal, why should American taxpayers do this for Wall Street?

What truly disgusts me is the scare tactics and flat-out threats the Feds have begun hurling at the American people. All year these guys have denied there being any economic issues. Now that they suddenly want us to pick up the tab for the problems they created, they tell us that we won’t get credit and will lose our jobs if we don’t agree to their proposal.

How many times did Wall Street CEOs assure the public that their firms were sound with adequate capital… only to issue more stock or bonds a few days later? Remember when Lehman Brothers issued 143 million shares at $28 only to go bankrupt a month later? How about Citigroup issuing stock at $35 and then falling like a brick? And don’t even get me started about Merrill Lynch’s John Thain.

And now, if we don’t pony up the cash to help these firms (or their acquirers since most of them no longer exist) we’re all going to lose our jobs and go broke… as if that isn’t already happening.

Folks, the real reason the financial system is collapsing is because the financial firms no longer trust one another. The Fed Funds rate hit a record 7% on Tuesday. So banks are charging each other 7% on inter-bank loans. I ask you, if the guys who follow financial markets for a living—the pros—don’t trust each other, why should we trust them?!?!

Indeed, anyone who bothers reading about the plan can see it offers little benefit to tax-payers. For one thing the whole idea that taxpayers might make money from the deal is an outright lie. This assumes there are stupid buyers—folks who will be willing to buy this junk after the taxpayers do. If there were stupid buyers for this stuff, we wouldn’t need a bailout to begin with.

Also, the idea that this will free up credit for US taxpayers is nonsense. The hedge funds, private equity firms, and others who would use the bailout as a toilet to dump their crappy debt into DON’T deal in consumer credit.

Look at Goldman Sachs, for instance. Warren Buffett invested $5 billion in the firm because he expects the big bailout. Goldman then becomes a commercial bank rather than an investment bank. It then buys a commercial bank in Utah. Does it start lending to consumers in the process?

Nope, instead it announces that it’s going to buy up to $50 billion in assets from distressed banks.

If the Feds really want to increase credit to consumers they could mandate that for every $1 of crappy paper a bank dumps into the bailout fund, they must also provide $1 in credit to consumers. Of course they won’t do that because the bailout isn’t meant to offer any benefits to tax-payers. It’s meant to merely buy time ‘til the current administration—Paulson included—can get out of office.

Warren Buffett once said that if you’re playing poker and you can’t tell who the patsy is within 30 minutes, you’re the patsy. Americans have finally figured out they’ve been the patsy since the credit crisis began. Now they’re cashing in their chips and refusing to continue to play, just as any sensible person would do. And the other players—Wall Street, the regulators, etc—have resorted to bullying Americans to continue playing.

There’s a word for this kind of thing. It’s not “bailout”… it’s extortion.

Best Regards,