“If we don’t get our second installment of the funding we’ll run out of cash, it’s that’s simple,” said Fritz Henderson. “We’ve been finalizing what we need to do. We anticipate receiving it. But it’s critical that we receive it.”

The last payment for GM is scheduled to be paid out in mid-February, but those funds are contingent upon the government receiving a detailed business proposal from the company that explains how they plan on turning things around.

If the money doesn’t arrive soon, the whole company will go under. I wonder how many tears (other than from workers and suppliers) the world would really shed in this case.

In a letter from Barofsky to Senate Finance Chairman Max Baucus, he said he pushed for more restrictions which are now being used by the Treasury Department.

Companies that receive TARP funds in the future will be forced to institute a series of internal controls, and they’ll have to explain how all of the TARP funds are used.

Barofsky doesn’t even have a permanent staff or office yet, so he says operationally he’s been a bit behind the curve but he expects that to change quickly.

The TARP program has been coming under fire lately for its’ nearly complete lack of oversight, which has allowed banks to uses funds in ways that were totally unexpected.

Barofsky said his office will be issuing a full report with recommendations by February 6th of this year.

TARP funds are not trickling down to consumers

Unfortunately for the average Joe, the banks have turned stingy now that they have their hands on fresh funds.

“With the banks in a state of catatonic fear now, they’re just sitting on the capital,” said Allan S. Blinder, professor of economics at Princeton University. “I don’t fault the banks one bit, since this shows Wall Street they’re safer, but then this doesn’t get you much improvement. If you’re taking money from the public purse, we should get something in return, and we’re really not.”

Not only are banks no longer interested in their core lending businesses, but they’re using TARP funds for all kinds of creative financing packages. Take the example of Hartford Financial Services. Since they’ve had so much trouble raising capital, they’ve decided to buy a savings and loan for $10 million. Once they do, they’re eligible for $3.2 billion worth of “TARP Relief.”

Tapping the CPP, part of the government’s Troubled Asset Relief Program, may help relieve such pressure. However, as an insurer, Hartford and some rivals weren’t able to access the program, which is aimed at banks and other lenders. The government has discussed expanding it, but that hadn’t happened yet and the deadline for applying expires Friday.

Of course this isn’t what the bailout was designed to do. Since the US economy is largely based on consumer spending, any stimulus package proposed by the government would be to “prime the pump”. The stimulus is needed to get consumers to spend, which creates more demand for business products, which keeps people working. Since the financial institutions that are receiving money from the government aren’t lending freely to consumers, the equation has already failed.

Unemployment leaders to higher default rates on credit

Of course the unemployment numbers are rising, and along with the freshly unemployed, creditors are bracing for a huge upswing in defaults on credit accounts. Seemingly a focus on keeping people employed would be at the forefront of any bailout proposal, but with companies using TARP funds to finance takeovers, you can expect even higher unemployment as companies consolidate.

Even with a Fed rate near Zero, banks won’t lend

Despite lowering the Fed rate to near zero and injecting billions in capital into struggling firms, the desired result of freely circulating credit has not been achieved. Worse, banks are acting like pigs at the trough. In recent weeks we’ve learned:

1. Companies that received TARP funds sponsored the Bowl Games
2. Companies that received TARP funds purchased vanity stadium naming rights
3. TARP fund recipients have paid billions out in executive bonuses
4. TARP funds have been used to finance takeovers of rivals (which result in layoffs)
5. TARP recipients still are lobbying Washington

What we haven’t heard is a single success story. Consumers are still hurting, and sales revenues are way off for every major manufacturer. Now with a monstrous stimulus package coming from President-elect Barack Obama, taxpayers are left to scratch their heads and wonder who really is steering this ship.

“American Express expects to issue and sell to the Treasury preferred stock of approximately 3.39 billion dollars and warrants to purchase shares of common stock for up to 15 percent of that amount,” the company said.

The deal represents very low cost capital to American Express. The preferred shares will pay a return of 5% for the first five years. Last month American Express was granted the right to become a commercial bank.

Standard & Poor’s cut American Express’ long-term debt rating last week and at least three equity analysts this month have recommended selling the shares as higher unemployment and a decline in consumer spending threaten earnings.

Card issuers, along with securities firms including Goldman Sachs Group Inc., insurers like Hartford Financial Services Group Inc. and commercial lender CIT Group Inc., sought status as bank holding companies to tap the government’s $700 billion financial industry rescue package. CIT said today its request for $2.33 billion won preliminary approval from the U.S.

American Express customers will be expected to continue to pay their bills while the company converts to bank status.