The Treasury Department last night insisted a $700bn bailout fund approved earlier by Congress was unlikely to be used to help any industry other than the US financial sector, dashing hopes the remaining $15bn of the first tranche of $350bn could be diverted to automakers.

The Senate last night nixed a $14bn bridge loan rescue package for the Detroit Three, prompting immediate calls for the treasury to provide funding from the Troubled Asset Relief Programme (TARP).

“I’d be shocked if the administration didn’t dip into TARP,” a senior Democratic aide told Reuters. “That is the only option now to keep these companies afloat.”

Republican senator Christopher Bond of Missouri told the news agency he had “reason to believe” that the White House would consider using TARP to help the automakers – GM and Chrysler have both said they need cash infusions of $4bn and $7bn this month to make it into the first quarter.

Ford is less precarious and has asked for a $6bn line of credit on which to draw if needed.

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As recriminations began to fly Friday morning, there was no indication from treasury secretary Henry Paulson that he was prepared to redirect TARP money to prop up ailing industrial companies, Reuters said.

Paulson had said last week failure of a major auto company “would not be a good thing” amid current economic distress and said he hoped Congress would “prove successful in addressing this issue.”

That failed to occur on Thursday night, despite expectations Senate Democrats and Republicans would eventually agree a compromise rescue bill after intense negotiations that went on well into the evening.

Reuters noted that Paulson had made clear he felt TARP funds were intended to help stabilise the US financial services sector and a Treasury spokeswoman last night told the news agency that position was unchanged despite the collapse of the Congress bailout effort.

Democrat House Speaker Nancy Pelosi had urged the Bush administration to use TARP money to help automakers but the White House disagreed, saying Congress should tap an existing Energy Department fuel efficiency improvement technology programme for any funding needed by the Detroit Three.

Should one or more of the Detroit automakers go bust, Bush now faces the possibility of leaving office on 20 January with a legacy of allowing an iconic US brand to go under on his watch. There have been suggestions he would act to prevent that.

Government Accountability Office head Gene Dodaro earlier this month said another option was to require US banks receiving TARP money to lend some of it to automakers, Reuters noted.

The report added that many lawmakers have criticised the use of TARP money by participating banks, saying that they have hoarded the money and not done enough to unfreeze credit for consumers and businesses. The Treasury Department had been criticised for not yet deciding if it would impose reporting requirements on banks so that the government could monitor how taxpayer money was used.