Well, excuse me for being a cynic, but I think this will work like this:
Fed's Dudley says NY Fed, money managers and banks will create swap plan
1. QE2 will be shut down, as the inflation expectations it bring with it are spiralling out of control.
2.The primary dealers will keep buying treasuries, but will repo these back to the Fed in exchange for cash.
One of the drivers of John Law's Mississippi Company bubble, was the French National Bank allowing MC equity being accepted as collateral for new debt - which would then be promptly reinvested in MC equity (repeat ad infinitum).
But, this time, instead of Mississippi Company equity eventually crashing, it will be US Treasuries.
But, of course, that's just my opinion as a cynic.