Like everyone else, currency traders awaited the Treasury Secretary’s “comprehensive” financial rescue plan, the sequel to the Troubled Asset Relief Program.

“With the focus on the Senate [stimulus package] vote and details of Treasury Secretary Geithner’s TARP plan [due Tuesday], the currency markets are likely remain cautiously negative on the dollar,” wrote Marc Chandler, of Brown Brothers Harriman.

Obama’s chief economic advisor Lawrence Summers tipped Americans to what is coming on Sunday, saying that the bank plan “can’t all be private capital, but with the right kinds of government guarantees and the right kinds of financing, strategic approaches, Geithner believes we can bring in substantial private capital.”

One thing under consideration is creation of a “bad bank,” or “aggregator bank,” that would buy illiquid mortgage securities. It could be partly funded by some of the remaining money from the existing $700 billion Troubled Asset Relief Program fund, but the majority of the funds would come from the private sector, according to a Wall Street Journal report.

And Marketwatch.com wrote that, “The Treasury is reportedly considering using a chunk of the remaining $350 billion in bank bailout funds to make capital injections using a form of preferred security that would pay interest like bonds but would be convertible into common shares after a set period of time, perhaps seven years.

“Banks would have an incentive to buy out the government’s stake before the conversion because once they become common shares the investment would dilute existing common shareholders, lowering the value of the bank’s shares.”

Source: Dollar Slips