Europe will need help - the Fed can support

“The situation in Europe poses significant risks to the US financial system and economy and must be monitored closely.” – Ben Bernanke

With a Spanish bank bail-out likely costing more than a $125 billion, the death spiral continues. There will be a point when the money is not available for the next bail-out. The Fed could be an important player in the European story since there will not be any help from the US government. The Fed could provide dollar swaps to banks in order to add liquidity to the overall system. This would be similar to the swap lines offered in the last year when money was flowing back to Europe.  

There is some truth to the comments comments that Europe may drive the US election, so help in the form of monetary support to the EU is likely as a derivative of looser monetary policy in the US.