The Federal Reserve's decision to reopen swap lines with the European Central Bank as well as central banks in Japan, Switzerland, the United Kingdom and Canada puts it in a delicate political position.

Congress is moving forward a financial regulatory overhaul that could rein in the Fed amid sharp criticism of its actions before and during the financial crisis. The overseas lending program it reopened Sunday in response to pleas from Europe is among the programs lawmakers have criticized, with some suggesting the central bank is bailing out foreign banks and others saying the Fed is too secretive about details.

Fed officials dispute that. They plan to counter criticism on Capitol Hill by sharing more details and elaborating on the reasons that the U.S. economy and markets are put at risk by turmoil in Europe. "These facilities are designed to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and financial centers," the Fed said Sunday.

Central bank officials plan to provide more information on the swap lines — including details about how the funds are used and the legal agreements behind them — to demonstrate that they are not being secretive.

Under the swap lines, the Fed lends to foreign central banks, which in turn use the money to make U.S. dollar loans to financial institutions in their home markets. Fed officials say there is little risk with these loans because their counterparties are central banks, not foreign financial institutions.

"I think Europe has a severe challenge on its hands" with the Greek debt crisis, Charles Plosser, the president of the Federal Reserve Bank of Philadelphia, said in an interview Monday on CNBC. Citing the nearly $1 trillion European effort, Plosser said, "hopefully, this is going to alleviate some of these concerns" and reduce the risks of the contagion's spread through the financial system.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.