The Senate rejected the bill for a $14 billion U.S. auto bailout on Thursday, sending global stocks plummeting.
If the bailout package is not passed, the global economic crisis could become a global "catastrophe," according to David Kudla, CEO of Mainstay Capital Management
But Roger Nightingale, economist from Pointon York disagreed. The auto bailout should never have been considered in the first place and that the only reason why it was, was because the U.S. government approved of a costly bank rescue plan, he said.
"When the banks got into trouble, they argued that they were special and needed help. And the government agreed," Nightingale told CNBC. "And doing that, they made the fellows from whom they took the money worse off. Like the car companies."
"The car companies have been made worse off by having to give resources to the banks," he said.
Banks should return the money given to them by the government in order to reset the economic situation, Nightingale added.
"My suggestion is that we go back to the first stage and take the money back from the banks. Cut interest rates… but don't do fiscal adjustment," Nightingale said.
Once the banks have repaid the money, governments will have enough resources to help others out, he said.