Around 2000 Kudla presented conjectures about deep relations between arithmetic intersection theory, Eisenstein series and their derivatives, and special values of Rankin L-series. The aim of this text is to work out the details of an old unpublished draft on the second authors attempt to prove these conjectures for the case of the product of two modular curves. The mayor difficulties in our situation are of analytical nature, therefore this text assembles some material concerning Kudla's Green function associated to this situation. We present a mild modification of this Green function that satisfies the requirements of being a Green function in the sense of Arakelov theory on the natural compactification in addition. Only this allows us to define arithmetic special cycles. We then prove that the generating series of those modified arithmetic special cycles is as predicted by Kudla's conjectures a modular form with values in the first arithmetic Chow group