Washington’s Blog 
May 9, 2010
points out , the Federal Reserve might open up its “swap lines” again to bail out the Europeans:
The Fed is considering whether to reopen a lending program put in place during the financial crisis in which it shipped dollars overseas through foreign central banks like the European Central Bank, Swiss National Bank and Bank of England. The central banks, in turn, lent the dollars out to banks in their home countries in need of dollar funding. It was aimed at preventing further financial contagion.
The Fed has felt that it is premature to reopen this program — which was shut down in February as the financial crisis appeared to wane — because it wasn’t clear that foreign banks were in need of dollar funds. Still, trading floors on Wall Street are abuzz with anticipation today that the Fed might use the program again as Europe’s problems take on a more global dimension.
The international lending lines are known among central bankers as swaps.
Fed officials believe the swap program was one of its most successful interventions aimed at stemming a global crisis, when many banks overseas became strained for dollar funding. In their normal course of business, they borrowed dollars in short-term lending markets and used those dollars to finance holdings of long-term U.S. dollar assets, like Treasury or mortgage bonds. When those markets dried up, the swap lines helped to prevent overseas bank funding crises in 2008.
Fed officials see the swaps as a low-risk program, because its counterparties in these loans are foreign central banks, and not private banks. At a crescendo in the crisis in December 2008, the Fed had shipped $583 billion overseas in the form of these swaps.
As the BBC’s Robert Peston writes :
There is talk of the ECB providing some kind of one year repo facility (where government bonds are swapped for 12-month loans) in collaboration with the US Federal Reserve.
See this  for more information on swap lines.
Indeed, the Federal Reserve has been helping to bail out foreign central banks and private banks for years.
For example, $40 billion in bailout money  given to AIG went to foreign banks. Indeed, even AIG’s former chief said  that the government used AIG “to funnel money to other Institutions, including foreign banks”.
As the Telegraph wrote  in September 2008:
The Fed has also just offered another $125bn of liquidity to banks outside the US that are desperate for dollars and can’t access America’s frozen credit markets.
Congressman Grayson said  that the Fed secretly “stuffed” half a trillion dollars in foreign pockets.
(Of course, the Fed won’t tell  Congress or the TARP overseer – let alone the American people – who got the cash).
And as I pointed out  the same month:
A Fact Sheet  from the U.S. Treasury says:
Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.
An article  from today in Politico explains
“In a change from the original proposal sent to Capitol Hill, foreign-based banks with big U.S. operations could qualify for the Treasury Department’s mortgage bailout, according to the fine print of an administration statement Saturday night.”
Of course, even much of the bailout money which went to American banks ended up being shuttled abroad. As I wrote  in March 2009:
Moreover, bailout money that went to Citigroup was loaned to Dubai, bailout money that went to Bank of America China was invested in China , and bailout money given to JP Morgan was invested in India .
And the government is in the process of providing billions more – along with trillions more in guarantees of worthless assets  – to sovereign wealth funds and hedge funds.
So not only are Americans bailing out our own too big to fail banks, but we’re bailing out foreign mega-banks as well.
Even though bailing out Europe might make sense if America was flush with cash, things are different now. As Congressmen Kucinich and Filner wrote  last June:
Our country and this body cannot afford to spend American tax payer dollars to bail out private European banks.
In addition, the U.S. is – of course – also contributing tens of billions of dollars  towards the Greek bailout through its contributions to the International Monetary Fund. Some allege that the U.S. will secretly help bailout of all of Europe. See this  and this .