Ultra-short exchange traded funds (ETFs) are destroying the financial system and socking it to taxpayers, says Jim Cramer.

Because of their short selling, the government will have difficulty stabilizing banks — as well as the entire economy, Cramer charges on CNBC’s Mad Money show.

As bank shares fall, he explains, banks will have more trouble raising capital, which they need to survive and make loans. The government, in turn, will have to come to the rescue, costing billions of dollars.

These ETFs destroy confidence that’s now so badly needed, and makes separating the good banks from bad banks almost impossible, Cramer argues.

Cramer is targeting UltraShort Financials ProShares (SKF).

“We call it the ETF of mass destruction,” he says.

“It’s contributing to the wholesale destruction of the financial system. It’s the stock version of the Salem witch trials.”

Incredibly, the SEC has still allows the ETFs to operate, despite the fact that they let short sellers avoid margin rules.

“I can’t believe the government doesn’t stop it. If you want to get outraged about something, this should be it,” Cramer says.

You might think betting against financials would be a windfall, but SKF is down 28 percent over the last three months, he says.

“It doesn’t work as advertised.”

Cramer is right this time, says Don Fishback, a derivatives expert who often disagrees with the television host.

“These products have become gigantic trading vehicles that allow people to exceed the Federal Reserve margin/leverage limits,” Fishback writes in his Seeking Alpha blog.