Monetary Matters with Jack Farley “Potemkin Village of Credit” | BankRegData’s Bill Moreland on Banks’ Loan Modification Morass & Note-on-Note Financing Spree
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Aug 26, 2025 Bill Moreland, Principal of BankRegData, sheds light on the murky practices of loan modifications in the banking industry. He argues that banks' heavy reliance on these modifications may distort delinquency reports, creating a misleading credit landscape. Moreland introduces note-on-note financing, a scheme that obscures actual losses on balance sheets. The discussion raises alarms about the impact of regulatory changes and the growing disconnect between banking practices and everyday investors, underscoring the urgent need for transparency in the financial sector.
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Loan Mods Create A Credit Illusion
- Banks have massively increased loan modifications and changed reporting rules, making delinquencies look better than they really are.
- Bill Moreland calls this a Potemkin village that hides true credit stress from outsiders.
Practitioner Perspective From Collections
- Bill Moreland recounts his experience running collections and loan modifications at Wells Fargo and AmEx.
- He warns modifications are medicine in moderation but a gateway drug when overused.
Reporting Change Enables Repeated Modifications
- Regulators changed reporting in 2023 so modifications can drop off reported totals after 12 months, hiding cumulative life-to-date mods.
- That change lets banks repeatedly re-modify loans and suppress delinquency spikes in public data.
