Auto bail-out fails in Senate

Despite the House of Representatives overwhelmingly passing a similar bill on Wednesday night, the Senate on Thursday night failed to rally the 60 votes needed to bail-out General Motors and Chrysler, devastating world markets and threatening to bring more trouble to the global economy.┬á┬á "I dread looking at Wall Street tomorrow," said Senate Majority Leader Harry Reid on the Senate floor in Washington last night. "It's not going to be a pleasant sight."┬á Stocks tumbled around the world starting with a 37 percent drop for General Motors, and Honda Motor Co and Daimler AG sank more than 8 percent. The dollar fell to a 13-year low against the yen and the cost of protecting corporate bonds against default soared. Treasuries rallied and yields fell to record lows. Metals and crude oil slumped.┬á ÔÇ£Investors have been betrayed again by U.S. politicians,ÔÇØ said Yasuhiro Miyata, who helps manage about $109 billion at DIAM Co. in Tokyo. ÔÇ£Even with the knowledge that we are in the midst of a crisis, they were unable to come to an agreement and investors have decided to abandon ship.ÔÇØ┬á Does this mean bankruptcy is inevitable for the companies? Not necessarily. Treasury Secretary Henry Paulson can still help Detroit by using money from the $700 billion financial services bailout. But the debate over whether to use this money has long been a sticking point with the Bush administration, which has said the funds are to be used to ease credit markets--not to rescue individual industries.┬á A collapse of GM and Chrysler ÔÇ£is worrisome for the U.S. in particular, but we are in a synchronized world so it will have an impact elsewhere,ÔÇØ said Franz Wenzel, Paris-based deputy director for investment strategy at Axa Investment Managers.ÔÇ£It puts into question any chance of a U.S. recovery that we had expected from mid-2009 onwards.ÔÇØ  ┬á "We are deeply disappointed that agreement could not be reached tonight in the Senate despite the best bipartisan efforts," said GM spokesman Tony Cervone following the vote. "We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis."