US taxpayers could be on hook for Europe bailout.

By John W. Schoen, Senior Producer

The U.S. is coming to Europe's financial rescue.

So far, America's role is fairly limited. But if the crisis continues to grow and the U.S. takes on a wider role, U.S. consumers and taxpayers could feel a bigger impact. The biggest exposure could come from America's status as the single largest source of money for the International Monetary Fund.

The latest round of American financial assistance came Thursday with a promise by the Federal Reserve to swap as many dollars for euros as European bankers need. In the short run, those transactions won't have much impact because the central banks are simply swapping currencies of equal value. If the move helps avert a wider crisis, it could help spare the global economy from another recession.

But over the long term, consumers could feel the impact of central bankers flooding the financial system with cash, according to John Ryding, chief economist at RDQ Economics.

"This is a lender of last resort function," he told CNBC. "With the dollar injections that the Fed has done, it's like giving a patient medicine with really bad side effects." Ryding said the bad side effect in the U.S. has been inflation, which has picked up to 3.8 percent year over year.

Fed policymakers meet next week to decide whether the flagging U.S. economy needs another round of easy-money measures that could include buying more Treasury bonds to push more cash into the financial system.

So far, no one has floated publicly the idea of the U.S underwriting a broader bailout of the European financial system. But Senate Republicans have already voiced concerns over such a move.

"Our concern is that innocent American taxpayers will pay for yet another bailout -- this time to one or several countries whose spending and debt choices led them to financial calamity, Sen. Orrin Hatch, R-Utah, and seven other Republican senators wrote in a letter to Treasury Secretary Timothy Geithner in June.

The source of the senators' concern is an emergency provision, approved by the Group of 20 industrialized nations in 2009, granting the IMF broad powers to expand its lending authority. That could leave American taxpayers on the hook for any IMF loans that later go bad.

In July, Geithner sought to reassure the senators that won't happen.

"The United States has never experienced a loss on its IMF commitments," Geithner wrote. "The IMF's claims are recognized by Europe to stand ahead of all others. This, along with the IMF's strong financial resources, provides further assurance that our claims on the fund are secure."