US taxpayers could be on the hook for $50 billion or more as part of the European debt bailout, which is likely to be a close cousin to the strategy used to rescue the American financial system.
Determining the exact exposure at this point is nearly impossible until governments start stepping up to the window created by the European Union and the International Monetary Fund to stem the crisis in Greece and elsewhere on the continent.
But one rule-of-thumb formula puts potential US exposure at $54 billion should the entire IMF loan fund be tapped.
And that doesn't count the added exposure created by the Federal Reserve's decision over the weekend to participate in currency swaps to provide liquidity to jittery European banks. The swaps move resembles the Term Auction Facility the Fed instituted when the worst of the US financial crisis hit in 2007-08.
And the entire bailout package has been nicknamed "Le Tarp" by some for its similarity to the Troubled Asset Relief Program that bailed out US companies with taxpayer-backed loans.
US involvement in the European crisis already has drawn critics from Congress and economists who think the domestic financial issues should be cleared up first.
"Inflation and debt is not the answer to a problem caused by inflation and debt," said Michael Pento, chief economist at Delta Global Advisors and a critic of both the European plan and the Fed's approach to US fiscal stability. "It's a European problem that should have been dealt with by Europeans."
In Washington, the White House said taxpayers will not be liable for the European bailout. (See video)
But the US is a participant in the International Monetary Fund, which has agreed to work with the European Union to help countries that come under debt duress.
The IMF has pledged a one-third share of the 750 billion-euro ($952 billion) rescue packagetypical of the fund's arrangements with central banks in such cases.
That would come to 250 billion euros, though that is only a rough figure and dependent on a variety of circumstances, according to an IMF official who spoke on condition of anonymity because of the uncertainty still involved.
The US would be responsible for 17.09 percent, or $54 billion, of the cost using a quota contribution system the IMF uses in such instances. The US is the leading contributor under the quota setup.
But pinpointing the exact figure is difficult because all loans are not created equal, and will depend on the currencies in which they are issued and the arrangements between the parties.
Also, the basis of the loans won't be solely on the quota calculation, which accounts for only half the formula. The other half is a pro-rated basis for which the US does not currently have an agreement but is likely to in the future. That pool comes from wealthier countries with "useable resources," with the typical arrangement for the US being higher than the 17 percent for the quota share.
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