The government’s latest bailout plan is focused on handing banks scads of money so they can start lending again. But as today’s New York Times reports, that second part -- the lending -- doesn’t look like it’s going to happen anytime soon.

The Treasury Department doesn’t actually require the banks to do anything with the money. “There is no express statutory requirement that says you must make this amount of loans,” John Dugan, a Treasury official, told the Times. Instead, the main leverage will be guilt-tripping. Or as Dugan put it, the banks decisions will be subject “to the court of public opinion.”

“It is the government’s responsibility to set the terms and conditions on this money,” said David Walker, the former federal comptroller general. “This is the people’s money. They’re giving it out with no rules.”

While the banks no doubt would love to help the economy and lend out the money, they also need to shore up their own bottom lines, since the banks have been booking huge losses. So rather than lending the money out as the government envisions (and thus helping to unfreeze the credit markets), the banks have another plan in mind for the moment: hoard the cash.

At least for the next quarter, the chief executive of Merrill Lynch told investors, the bailout money is “just going to be a cushion."

Most of the other banks – with the exception of JP Morgan -- also “declined to comment on how they will spend the government funds once they arrive.”

As one analyst told the Times, the banks could be keeping the cushion for good while: “My expectation is it’s quarters off, not months off, before you see that capital being put to work.”

The banks need the money so badly because they’ve lost huge sums from the bursting of the housing and credit bubbles. The Times says the U.S.’s nine biggest banks (the ones offered the bailout money this week) made a combined $305 billion in profits from 2004 through the middle of 2007. Since then the banks have had to mark down their assets by “just over that amount.”

According to economist Nouriel Roubini, the soothsayer of the meltdown, the massive losses mean the government is going to have to double the amount of bailout money it's offering the banks. “This will be the first round of recapitalization of the banks,” Roubini told Bloomberg News. He also says the government is going to have to stop being so hands-off with the banks. “The government has to decide to intervene much more directly in the provision of credit and the management of these companies.”

None of this comes as much of a surprise. As we wrote earlier this week, from the time the new bailout was announced, there’s been concern that the Treasury Department had no way of forcing the banks to spend the money:

Will Banks Blow Bailout Money?

Gov’t Bailout 2.0 Hands-Off Compared to UK’s