"'The president is probably going to come to their rescue, because the Congress has really punted the ball over to the White House,' (retired Vanguard Group founder John) Bogle, 79, said in an interview with Bloomberg (story here). "That will give them temporary stop-gap aid. I do not think General Motors is going to go out of business."

"Stocks tumbled around the world and the dollar slumped after the Senate voted against the $14 billion plan, threatening the survival of GM and Chrysler LLC. Treasuries rallied and yields fell to record lows.

"Standard and Poor's 500 futures expiring in March dropped 3.9 percent to 840.20 at 8:34 a.m. in New York. The MSCI World Index of 23 developed stock market slumped 1.6 percent. GM shares dropped 30 percent to $2.90."

UPDATE:  "The failure last night of the United States Senate to pass a loan package for the "Big Three" now puts the ball squarely—and quite uncomfortably—in the court of the Bush administration," writes Blank Rome's Financial Watch newsletter here. "Throughout this crisis, Democratic leaders on capitol hill have urged the Treasury Department to step in with TARP funds to assist the auto manufacturers. Treasury has resisted saying that was not the intent of the legislation that created TARP. They have never said, however, that the legislation does not allow it...

"The ripple effects of a collapse of GM, for example, would be substantial. In some ways then this is Lehman redux. Only now we have a president-elect taking office in five weeks who has said bankruptcy is unacceptable for any one of the Big Three.

"If the Treasury Department does not act, that amounts to a decision by the outgoing president to allow gm to go bankrupt. That would be one of the most momentous decisions made by a president at the end of his term in memory. It will also deepen the already daunting challenges facing the new president.

"We will be watching for hybrid Malibus with Michigan manufacturer plates pulling into the White House driveway."