The UK recently had a failed gilt offering without too much fallout. But the ramifications of a failed Treasury auction are unlikely to be of similarly small magnitude:
One of the evil side effects of the BHC structure that has been illustrated by the failures of WaMu and Lehman Brothers is the reality that the customers and counterparties of the bank subsidiary are actually senior to the debt holders of the parent BHC. This tension has caused a great deal of delay and confusion in moving forward with a solution to the solvency problems facing the large zombie banks. Foreign bond holders, like the government of China, have reportedly told the Obama Administration that further losses to debt holders of US banks will result in a boycott of US Treasury auctions.
If “zombie banks” are part of your economic plan, it’s probably not a very good one. Ask Japan how well that strategy has worked out for them.