Doing the right thing doesn’t necessarily mean that no negative consequences will arise, and the world markets have delivered those this morning after the failure of the automaker bailout package last night in the Senate.  International exchange indexes have dropped between three to six percent overnight on the news, and the futures market for Wall Street looks equally grim:

World stock markets plunged Friday as the U.S. Senate’s rejection of a $14 billion deal to rescue Detroit’s ailing automakers stoked concerns that the recession in the world’s largest economy will be even longer and deeper than projected.

The FTSE 100 of leading British shares was down 127.87 points, or 2.9 percent, at 4,260.82, while Germany’s DAX fell 185.22 points, or 3.9 percent, to 4,581.98. The CAC-40 in France fell 130.48 points, or 4.0 percent, to 3,175.65.

Earlier, Asian markets tumbled, with Japan’s Nikkei 225 stock average down 484.68 points, or 5.6 percent, to 8,235.87. Hong Kong’s Hang Seng index slid 5.5 percent to 14,758.39.

U.S. stock index futures pointed to a big sell-off later on Wall Street. The Dow Jones industrial average was projected to drop 259 points, or 3.0 percent, to 8,311, while the broader Standard & Poor’s 500 index was forecast to fall 32.90 points, or 3.8 percent, to 841.60.

They needn’t be too concerned.  Based on Politico’s reporting of remarks made by VP Dick Cheney to a group of Republican Senators on Wednesday, the White House appears ready to ride to the bailout rescue:

Administration officials have been warning for weeks that failure to pass the bill could lead to an even deeper recession.

That was the message Vice President Dick Cheney brought to a closed-door Senate GOP lunch Wednesday, reportedly warning that it’ll be “Herbert Hoover” time if aid to the industry was rejected, according to a senator familiar with the remarks. A Cheney spokeswoman would neither confirm nor deny the vice president’s remarks.

The White House could still use its authority under the financial bailout law known as the Troubled Assets Relief Program to provide aid to the industry, but the Bush administration has strongly resisted that approach. Meanwhile, Federal Reserve Chairman Ben Bernanke has warned that he could not be relied on as a backstop if additional loans were needed for the first quarter of next year.

“Herbert Hoover time”?  That’s a pretty serious misreading of history.  The Great Depression started off as a credit crisis of sorts, with margin calls going unanswered after a stock market crash.  However, that just set off a sharp recession.  It didn’t turn into a Great Depression, with deflation and capital destruction, until Hoover started massive government intervention in the marketplace, raising taxes and erecting trade barriers.  FDR followed that with even higher taxes and massive government jobs programs that stripped the private sector of badly-needed investment capital as well as opportunities to perform those same tasks more efficiently.

If anything, this bailout mania has been much more reminiscent of Hoover than the vote yesterday.  And Hoover didn’t have the lessons of history that Cheney and the rest of the bailout disciples have today.  We saw what massive government intervention did to markets then, and what it did to credit markets over the last ten years.  When will people finally learn that government distortion creates massively bad results?

Without a doubt, the Bush administration will look at the markets and panic — again — into cutting big loans to automakers.  If that doesn’t happen by the closing bell today, it will happen before the markets open again on Monday.  At this point, though, the Bush administration is history, not the future, and they can answer for their ridiculous economic policies over last two months when the automakers demand even more subsidies to continue doing exactly what led them into near-bankruptcy in March.

Update: Right on time:

The White House said Friday it is willing to consider using some of the $700 billion Wall Street bailout fund to help the U.S. auto industry. …

The White House said it was evaluating its options in light of the breakdown on Capitol Hill.

“It’s disappointing that Congress failed to act tonight,” Deputy Press Secretary Tony Fratto said in a statement. “We think the legislation we negotiated provided an opportunity to use funds already appropriated for automakers and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable.”

By the closing bell today.  Bet on it.

Update: Fox Business just issued an on-air report at noon ET saying that Treasury has indeed decided to use TARP funds for the bailout.  I told you so.