Time for some loan forgiveness
Because as we know, no banker, ever, has done anything meriting jail time. /s
16
I may be called a socialist when I say this (which I am not because I have seen Maoist violence first hand), but in a Capitalist economy, progress or what capitalism calls "success" cannot be achieved unless one party (which is usually those who control labor market, production, and distribution) exploits the other under daylight. There is no economy that can have few countable billionaires while hundreds of masses huddled under a roof (working two to three jobs and yet still worried about the next pay check), unless exploitation is the mantra. The tragic story of the New York taxi drivers and the life of luxury others lived at the cost of their back breaking labor and tears is a testimony of "cruel and inhumane capitalism." There must be a social element (larger good) incorporated into the system, otherwise the fate of the taxi drivers has been the fate of many people who sell their labor. We must "humanize" capitalistic system.
35
I drove a cab for 6 years in New York the 1970s. It's a tough grind really only suitable for young men and women. I feel sorry for these guys. Many of them came to a new country and got taken. Much to their detriment they learned a hard lesson in bear knuckle capitalism.
21
Why is Daus allowed to get away scott free after not doing his job for years and instead contributing to this travesty via slick advertising??
23
It was Ronald Reagan who got this disastrous ball rolling when he famously said, "government IS the problem." With our seemingly complete inability now to properly oversee corporate America, and refusal to punish executives whose companies exploit less sophisticated consumers with impunity, income inequality is on steroids with no end in sight. With Elizabeth Warren's consumer protection agency now crushed, expect the endless series of disgusting cons to continue.
34
I’m using taxis when I visit NYC from here on out.
10
@David Barrett
If you want a good laugh, ask your cabbie for proof of insurance. He won't be able to provide that to you.
Good luck!
5
This “racket” was controlled by people who were open and flagrant about the dirty people and money who were in control of the taxi industry in New York City. Michael Cohen was there. So were numerous “hedge fund” owners with weekend estates tucked away in New Jersey.
What many of us did NOT see was this rapacious exploitation of the immigrant community as taxi medallions lost value and were being sold off in a way that mimics the slave trade.
This is a town where Donald Trump was allowed to flourish. What made us think that anything but money rules there? Certainly not ethics or a moral compass.
25
I think NYC is an extreme example of local corruption. Local government plays a much greater role in the local economy than in most of the rest of the USA. The recent article on unmonitored salaries of subway workers who fill out their own time cards is another example - the city is afraid to alienate the unions who have privileges that most of the rest of the country. I also recall an article not too long ago that discussed how it was not possible to account for the job responsibilities of half the "workers" standing around at the dig of a new subway tunnel. One also wonders to what extent such corruption is responsible for the extremely high cost of living in NYC.
15
If you really pay attention to these people's stories, and don't just lazily buy into the author's premise, you realize this issue is mostly nonsense. It doesn't take a financial genius to understand that you don't borrow a million dollars to purchase an asset that provides you a job paying forty thousand a year in income. The income won't support it, plus it's a bad investment - unless you think the asset is going to dramatically appreciate. Most of these people were speculators, and they got burned. They were never planning to pay off those loans out of cash flow. Everyone involved in this game understands that.
24
Sounds exactly like the folks that took out enormous tudent loans to attend college and are then "surprised" at how long it takes to pay back the money they voluntarily borrowed.
7
Or the housemaids who took out $350k mortgages because they thought somehow American capitalism worked differently than in their own country where no way they could imagine being able to live in a neighborhood of Lexuses on a beater income.
2
"Mr. Murstein, Mr. Woloz, Mr. Freidman and Mr. D’Amato all declined to comment...."
I wonder why... could it be ta version of pleading the 5th? There should be consequences for knowingly fleecing people and driving them into bankruptcy.
13
Good thing none of NYC's Mayors are running for President, might have to answer to working people about their complete disregard for the well being of the Taxi Drivers
17
Same reason that we should not let people buy homes with no money down.
10
Reads like a "racket". How is that the free-market? How shameful that, mostly immigrants, coming here for a better life and more egalitarian opportunities end up enslaved to a "stupid" medallion system. I remember reading last year in this very paper about a guy that killed himself on the steps of some city agency, I was heart broken when I read that in such despair over paying a ridiculous amount for his medallion and then having to compete with Uber and Lyft drivers, he saw no other future than to kill himself!
41
It is not and never was a "free market." It was a government controlled program from top to bottom and - surprise - it was run by corrupt and self-serving politicians and bureaucrats.
22
Sorry, not to excuse the predator banks involved, but unless they're mentally challenged, they shouldn't be signing loan documents they don't understand.
The government already implemented disclosure laws, so one of two things occurred, the banks didn't disclose the terms or the borrowers didn't read or understand them. We have no shortage of lawyers in this country so why not have the contract review for a nominal fee? caveat emptor does apply
8
Sad story told very well. I hope the drivers and their families get some justice as a result.
10
ONLY WAY TO GET BANKERS TO BEHAVE ETHICALLY is stiff jail terms, and greater regulation. The way to restrain greed is a PROGRESSIVE tax scale - 1% up to $10k rising to 90% over $5M. A ‘growing’ economy is useless when it results in increased homelessness, people with no sickness care, and a military that just wants to keep making war.
23
How are character and integrity not as important as financial wealth? People who prey on others are impoverished. Thank you for this story. Here’s to H Haywood Miller iii and friends who are bringing this horrible travesty to light.
11
Remarkably similar circumstances arose in Australia. In Sydney/NSW `taxi plates' were our medallions. The original intent to provide taxi drivers with a safe asset they could carry to retirement.
In time the system became perverted with investors acquiring plates to trade. Once worth tens of thousands the plates ended up nudging $400,000. The largest plate owner an unscrupulous merchant bank.
Various governments must also accept the blame for choosing to limit supply in order to maintain plate values.
Then came UBER and turned the whole taxi industry on its head.
Plate values have crashed. People have been bankrupted. Retirements trashed. Suicides have happened.
The merchant bankers and money will no doubt move onto the NBT. Would be ironic if they have lost money on the UBER IPO.
7
Free markets are cruel to the ignorant and uninformed. Uber has been around for almost 10 years.
2
How about having Bloomberg bail out these poor victims by forgiving all or part of their loans? One has to wonder how he feels about all the suicides and other misery....and how he sleeps at night.
12
Now, at last, you have the semblance of a free market and the benefits to millions of New Yorkers, sorry to say. far outweigh the misery of a thousand bankrupt immigrants.
4
And, when you land at LGA now, if you want to take a taxi, you have to ride a shuttle to go to the taxi pickup location. But Uber and Lyft have convenient pick up spots right outside of arrivals. Wow NYC, you've discriminated against taxi drivers yet again.
22
The Times should investigate and report on how Michael Cohen and members of his family financed their investments in the medallion taxi business. It might shed light on another aspect of his criminal pursuits while working with DJT.
18
Supply and demand, the number of medallions issued came nowhere near the increase in demand, so of course medallion prices went up. When Uber increased the supply of rides available the price dropped like a rock. There is no argument to make here, this is a simple fact. Now add DeBlasio rakes in $700,000 in campaign contributions from the Taxi industy and to return the favor he limits Uber, cutting supply again hoping to prop up values for his contributors. And of course ordinary New Yorkers suffer and those poor taxi drivers are basically enslaved by Deblasio's pals. Go ahead, just try to defend this low life.
13
I’m not sure I understand. Was this the result of not enough fares in a small space? If so I’m not surprised in the least: yellow cabs never came to my neighborhood in the time before Uber and Lyft. What was the “outer boroughs” (I still LOATHE that term) had to deal with what was on offer: black cars called from your home or the MTA options. Then Uber and Lyft seemed heaven sent; no discrimination, no hassles about your destination or use of credit cards. Finally the service I paid for in comfort cleanliness and courtesy. It may not last but I’m glad it here now.
16
This is a real stain on the city of New York. I thought that New York is a politically progressive city and that it had risen above such blatant corruption. That is a hope anyway. The New York Times doing an in depth report on this is good, better late than never, as the old saying goes. Is capitalism now defined as the right of certain people to prey on other peoples weaknesses without consequences? That’s not the only definition but it becoming increasingly more relevant. Because there are so many upsides and not enough downsides for this kind of behavior, it’s getting completely out of control. I’m really worried about the future of myself and this country.
11
In the meantime people are flocking to be self-employed taxi drivers working for on average $9/hour (Crain's Chicago Business) after they pay for their vehicles' operating expenses and that does not even consider depreciation.
3
It's not exactly reckless loans that devestated the medallion taxi industry it was reckless borrowing.
In many cases medallion owners dug their own graves by continually refinancing their medallions in order to pull equity out of their appreciated medallions to buy homes, pay for education, (not bad things), buy more medallions,(possibly bad), and to lavish luxuries on themselves instead of just paying off the medallions, (extravagant), and making their money without the continuing burden of paying off their medallions. But no. Many had big ideas.
If I owned a medallion on which I owed a ton of money I would take advantage of the Bankruptcy laws and go Chapter 7. If I wanted to stay in the business I'd buy another medallion for a very discounted price, maybe $185,000, and I'd make an OK living.
The further fact is that what killed the yellow taxi industry IS Uber and Lyft. Before Uber and Lyft if you needed a ride you'd hail a yellow, which I still do, or take a black car which is expensive.
That said, time marches on and frequently new industries supplant older industries. When's the last time you bought a cassette or used a pay phone or hailed a horse and buggy?
7
@MIKEinNYC
"If I owned a medallion on which I owed a ton of money I would take advantage of the Bankruptcy laws and go Chapter 7. If I wanted to stay in the business I'd buy another medallion for a very discounted price, maybe $185,000, and I'd make an OK living."
How would you come up with the $185k to buy another medallion? Because of the bankruptcy, any cash you had would go to creditors, and meanwhile, nobody would lend you another $185k.
6
@GMooG
People who have gone bankrupt are actually good credit risks because they can't do it again for 8 years. Everyone else, under the correct circumstances, can go bankrupt tomorrow.
Not to mention that the medallion is actually decent collateral.
2
What kind of incompetent bank would loan millions of dollars to TAXI drivers? Shame on them! These drivers wanted to make a living, these banks ruined their lives for the sake of the almighty dollar. Shouldn't they be protecting the bank's assets, not throwing dollars away like confetti?
7
After the hocus bogus of 9/11 and the influx of the new immigrants from countries with Xenophobia to many people in the US those immigrants should of think twice trusting anyone and buying into an inflated unrealistic interest base loans for a taxi license that is highly forbidden in Islam and considered one of the top unrepentant to God. My advice is to find a way out of this mess as soon as possible and leave the rest sort out their own ways. Only then God will help them. The Romans will always find a way to trap them.
1
@WZ
"My advice is to find a way out of this mess as soon as possible and leave the rest sort out their own ways."
Well, OK then. Very insightful. Thanks for your help.
6
So all the lenders,politicians,attorneys,bosses and all create and watch as a system destroys regular working folk.Same old song.
6
DeBlasio is running for president, as a progressive. Perhaps someone should question him about his role in this disgraceful scam. Sounds as though his administration rubber-stamped policies that benefited NYC at the expense of immigrant taxi drivers. How progressive is that? Not very; more Trump than New Deal.
9
A sad tale indeed. Thousands of innocent immigrants were forced at gun point by the City of New York to take out loans that sixth grade math would have shown they could not repay. They did this completely against their will, of course. Now many of them have declared bankruptcy, and, indeed, they are off the hook. They went from having nothing to having nothing, with a brief interlude of having a taxi medallion.
Meanwhile, the under regulated credit unions were forced at gun point by the City of New York to make a lot of loans that they should have known could not be repaid and now they are stuck. No doubt we, the taxpayers, will bail them out, as we do every greedy or ignorant group that has a modicum of political clout.
Is anyone else out there not crying his eyes out over this?
10
So what ultimately happens when a medallion owner defaults? They are not being bailed out. The lender is not being bailed out. Are these recourse loans? Recourse against what? Are they secured by anything beyond the medallion? I doubt there is much collateral to seize. Since nobody is being bailed out, we don't have to worry about bailouts. Ultimately, the driver can go back to leasing a medallion and continue to drive. The lender perhaps offloads the medallion to a hedge fund or some sort of fleet-or perhaps they hold the medallion and lease it. Either way, the medallion goes back to work. It is unfortunate for the original borrower, but unless they were really close to paying off the medallion what have they really lost. They are like a homeowner who mortgaged everything to the hilt and walks away. By the way, how do other borrowers make payments? It can't be that every recent purchaser defaulted, or has that happened.
2
It would be nice if all who helped perpetrate this scheme or turned a blind eye went to jail for a long time but so many layers and plausible deniability or lawyers one side can afford, and probably not. I hope karma gets them good.
I just returned from New York and used a lot of taxis, the drivers were all great and professional. Shame on those who took advantage of their work ethic, clearly missing in the regulators, although I doubt they have any shame left.
Bankers and their enablers are the cause in every financial disaster because as the saying goes, that's where the money is. There is no such thing as too much oversight; too many do not follow the rules and get away with it.
Brilliant reporting, NYT.
6
The city should let them declare bankruptcy for a nominal cost. Let the lenders bear the loss for their poor practices.
10
"Government agencies that were supposed to police the industry instead helped bankers turn it into their own moneymaking machine
Sounds like 2008, where the Fed, supposed to supevise the banks, let the banks turn into money making machine, issuing balloon mortgages to people who clearly could not pay
But guess what : AS BACK THEN, NONE OF THE BANKERS WILL GO TO JAIL, NOR THE OFFICIALS WHO FAILED TO PROPERLY OVERSEE THE BANKS
11
It is a race to the bottom between incompetence and corruption.
12
Lock them up! Lock them up!
At least, all these debts of poor drivers should be forgiven, and the expense dumped on the unscrupulous creditors.
10
@David Lindsay Jr.
Hear hear! How dare those bankers make a loan to a small businessman based on fair market value of collateral that may lose value in the future?
The key should be thrown away!
5
@David Lindsay Jr. The interest should be paid by the state for allowing corrupt and unscrupulous government agents (politicians & bureaucrats) to forcibly impose a monopoly on the public. And the taxi driver union should pay its fair share as well. Or don't you believe in fairness? The banks had no reason to provide loans if the corrupt and unscrupulous government agents didn't promise that the monopoly would last forever.
3
This is a savage tale, just like the student loan scandal that saddled young people with the equivalent of a home mortgage, just to graduate from school.
America has unleashed predatory businesses in the fields of education, real estate, medicine, and pharmacy in the name of ending regulation and allegedly encouraging individual initiative.
14
I expect bankers and people in private businesses to rip off whoever they can, and the nicer the shoes, the more dangerous they are. But public officials taking advantage of the situation is a disgusting violation of public trust, and the names of everyone involved should be made known so that their careers may be ended. Let them suffer penury for their violations.
7
We all know the criminal activities of some institutions in charge., and obviously medallion owners big shots, politicians... Mayors...New York is a money machine, can not stop and will never stop. No innocence over this . Who loses? The people that needs to work to live at least a decent life. Today in America, if one want to live normal, one have to be subject of this financial institutions . Vultures of the financial banks. They don't care if you are going to lose your job your house, family... We saw that in 2008 with the mortgage scandal, and to make worse we saw Republicans /Democrats agreement to bailed out greed bankers. Sadly more than 2 millions of Americans lost their homes. This is the America exceptionalism well praised by this buffoon president and so many arrogant leaders before him . Praised by all politicians,the military and ignorant citizens. The game of exceptionalism, made us to ignore the human life, the destruction , and suffering . A generation incapable to survive in the normal world. Look at Iraq, Afghanistan.....many other countries. We always believed in their lies , obviously with the media collaboration. Nobody is innocent here , and this criminal activities don’t have limited, it goes from taxi companies, houses, small businesses,Colleges, Universities, etc. We have no shame!! This nation is going to the same road of other countries , where corruption is part of the system and nobody go to jail.
6
Clearly the rapid rise in prices was a classic speculative bubble. The drives who purchased these medallions at prices that could not be supported by the income the taxi medalian produced were not dupeded by lenders. They knew or should have known that it was a speculative, high risk venture. They were betting that they would be able to sell the medallion for a big profit down the line. The lenders were market facilitators. Those who gambled too late in the cycle got caught when the bubble finally burst. No one forced these people to speculate. They made the decision and it proved to be a bad investment. Why should anyone feel sorry for them. At the end of the day, it was greed that did these driver's in.
4
Yes it was greed, the greed of the people driving up the prices and promoting predatory lending.
3
Whether it’s health insurance, student loans, bribes to universities, robocalls, taxi medallions, a President who profits from his office, or the dismantling of the CFPB, America is now all about scams that add major stress to the lives of average citizens while the rich get even richer.
9
Taxi drivers often make less than $40k/yr after expenses. Their medallions were costing 25x that.
Imagine if the government treated banking licenses like taxi medallions. The license for Wells Fargo with nearly $ 21.5B in net income last year would cost about $500B.
3
So what is going to be done about it. Or are we just going to say corruption is rampant. It's time someone, someplace was held responsible.
4
@Joan Porter
de Blasio runs for President.The rest get richer on the backs of the predatory loans.Goverment vulture capitalists.
1
What is the loan secured by? More than just the medallion itself? Why not just default on the loan...
1
This is the background for the Uber story, in which the NYT was quite critical. Uber did do some dodgy things, but to some degree it was a response to a corrupt monopoly.
A similar thing happened in Sydney Australia. Government regulations created distortions in the market e.g. paying by credit card in a taxi brought a 5% surcharge vs ~1% normally and a railway ticket to the airport costs ~$18 where one to the stop after costs about ~$5. Many taxis were poorly maintained. Many taxi drivers don't know Sydney and don't know how to use a navigation app and take wrong turns. Uber introduced competition: lower prices and a better service.
Now Uber are being sued for the loss of value for the commercial taxi plates, under the charge that they broke the law and that was what caused the loss of value. It will be an interesting case.
2
It took Uber and Lyft operating within a free market to (1) offer consumers better service and (2) expose the government and cartel racketeering over the taxi industry. A case study of how regulated industry favors an oligopoly.
11
"When creditors are careless with their loans they should suffer the consequences. When they lie about the loans or withhold information they should suffer for it. We should not bail them out. We should be bailing out the victims."
The creditors were greedy . The medallion buyers were also greedy. They expected the government to manipulate the price in a never ending rising price trajectory.
Under a Capitalist system nobody gets bailouts. Unfortunately most readers on the NYT are on the left. Their policies create a problem. Then their solution is a bailout. now they are calling for a bailout for students. It never ends.
4
Aren't the loans secured by the medallions only? Can the drivers just walk and let the lenders take them back and drive for Uber instead?
3
How is it so many loopholes are left open for banks, lenders and the charlatans noted in Sunday's article and today's paper. Stunning none had any sense how corrupt their business practices are. How is it there are no laws in place to protect those impacted by these schemes?
Mayor DeBlasio, are you listening?
2
@Paula Mayor DeBlasio has walked away from the job of fixing New York City and is doing what many try to do, fail upwards. You know, like Donald Trump, his apparent role model, well, with a Rudy Giuliani on the side.
1
Rolling Stone writer Matt Taibbi once described Goldman Sachs as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
This incredibly apt description of Goldman Sachs, equally applies to all of finance.
How sick is it that when the subprime house of cards fell in 2008, houses of finance then sought to rip off hard-working immigrants seeking medallion loans? It is even more obscene that we bailed out these houses of finance and "financial professionals". Thousands of investment bankers, not immigrant taxi drivers, should be bankrupt and living on the streets in poverty.
These tremendous articles by the NYTimes show what so many of us suspect in our hearts and what Bernie Sanders has so often said: our entire economic system is rigged. It is a rigged system which only further enriches the 1%.
Dennis Dollar, of the National Credit Union Administration, lived up to the lure of lucre, and is a grotesque embodiment of all that is sickening and slimy when the bus of untrammeled capitalism has no brakes.
Today, the excellent and widely acclaimed and deeply eloquent author Chimamanda Ngozi Adichie gave the Commencement Speech at Yale. In her book Americanah, the American Dream is discovered to be a lie. Sadly, so sadly, the hard-working immigrant taxi drivers learned the same lesson, and we must all resolve that such a tragedy and terrible injustice will never happen again.
7
@The Man
Well written: you have put your anger to good use.
Stephen Mnuchin's name has been linked many times the the subprime scandal. And it got him far,didn't it ?
A plum position with of the great vampire squid of Trump's White House and the McConnell Senate.
The USA is becoming a rogue state .
I do feel badly for all of the people who have become ruined financially due to the taxi medallion market. But I am not seeing anything in the article that states without equivocation that something blatantly deceptive occurred.
"They sell us medallions, and they knew it wasn’t worth price." Of course it was worth the price since YOU thought it was worth the price.
The only reason this has become an issue is because the bottom fell out of the market. You would not hear one peep or a complaint if the medallion racket was holding up and these people were making money selling to each successive greater fool. Somebody's gotta be left holding the bag, and here are the bagholders.
8
De Blasio has some explaining to do on the campaign trail. He is supposed to be pro-immigrant, I understand. Pro-exploitation of immigrants is more like it.
1
Age old question: What happened to the money?
1
Eager to profit off medallions or blinded by the taxi industry’s political connections, the agencies that were supposed to police the industry helped a small group of bankers and brokers to reshape it into their own moneymaking machine, according to internal records and interviews with more than 50 former government employees.
For more than a decade, the agencies reduced oversight of the taxi trade, exempted it from regulations, subsidized its operations and promoted its practices, records and interviews showed.
New York City in particular failed the taxi industry, The Times found. Two former mayors, Rudolph W. Giuliani and Michael R. Bloomberg, placed political allies inside the Taxi and Limousine Commission and directed it to sell medallions to help them balance budgets and fund priorities. Mayor Bill de Blasio continued the policies.
Under Mr. Bloomberg and Mr. de Blasio, the city made more than $855 million by selling taxi medallions and collecting taxes on private sales, according to the city.
Shameful conduct by “honest” government officials. These are examples of not uncommon government corruption.
Based on my own experiences with government corruption, I would conclude that government corruption is rampant throughout the United States.
91
@David Lockmiller
Under Mr. Bloomberg and Mr. de Blasio, the city made more than $855 million by selling taxi medallions and collecting taxes on private sales, according to the city.
Shameful conduct by “honest” government officials. These are examples of not uncommon government corruption. "
re: no corruption
The 855M did not go into the pockets of Deblasio or Bloomberg. it went to pay for the pensions and salaries of the overstaffed and overpaid municipal workers labor force.
4
@charles Exactly: if anything I am actually quite happy that at least the public has been benefitting from this bubble. In many countries taxi licenses are given up for free, so the people receiving them are the sole beneficiaries. These people are rarely drivers, since there a queue of many years to get one, so in these cases you could actually suspect that such an inefficient system is the result of corruption.
The New York system is a different issue: it’s everyone wins (but the consumer) until it collapses.
I have a friend who is a financial analyst (in a civilian capacity) for the military. A primary function of her job is to make sure contractors don’t overcharge for supplies (think $800 toilet seats) from paper clips to military hardware. She makes pretty good money (as she should) for doing this. There are additional levels of audits to ensure everything adds up.
How does corruption like this exist in an instance like this? Are there no analysts and oversight structures in a city as large and important as NYC?
In the case of these taxi medallions, it seems as though corruption is the platform. (It reminds me of a gang boss holding territory over pedicab drivers in a grade B Indian movie.) Imho, debts to small-holders should be forgiven, the platform dismantled, the lenders should be assigned the losses. Of course, this could end up a taxpayer burden, but what other recourse is there? Nobody’s going to jail (although it would have been nice) because it was a legal racket.
Stop the racket.
88
I think of it not as corruption but EXACTLY how late-stage, unfettered, greed-is-good capitalism is meant to work. Not a bug, a feature.
6
As sympathetic as I want to be towards the drivers, the yellow cab operating model was a failure.
When taxis were most needed, at rush hour, they switched shifts and left riders adrift looking for unavailable cars. I can remember how many times a car would pull up to ask where I was going, as they headed back to their garage for the shift change.
Also, the cars were often broken down, no ac, smelly and not well tended.Plus some of the drivers drove like maniacs.
This opened the door to Uber, Lyft and others, where rides can be had for less in new air conditioned cars. its a no brainer and why they have dominated the market recently.
All this leaves yellow cabs and their owners in the lurch, with worthless medallions. The market is cruel.
89
@Bocheball. Yes except Uber and Lyft give cheap comfy rides. But they now skim the pay of drivers and relegate them to gig work for low return in exchange for your comfort and convenience.
13
@Jen
Maybe if yellow cabs gave acceptable service they wouldn't be going broke.
11
Taxi fleets (ie private companies who own multiple medallions and lease to drivers) are responsible for the lack of rush hour cabs, not driver owners like the ones mentioned here. A lot has been written about this - taxi fleets require drivers to go to Queens for the shift change, taking cabs out of service for up to two hours. Drivers who own their own cabs actually alleviate the rush hour shortage by just arranging a quick changeover in Manhattan.
In fact a lot of your complaints are either about regulations put in place by the city or practices by fleet companies. Can you unlock your sympathy now and redirect your frustration to those who deserve it - predatory lenders and the city?
15
I see parallels here between the medallions and real estate and higher education. When you allow easy financing (low down payment mortgages, student loans) it drives up demand and increases the allies the price of what’s being financed to increase well beyond its value.
With regard to education - college costs have skyrocketed far in excess of inflation.
68
@GC Colleges have no skin in the game since the person who buys the product (students) don't pay up front. Rather, students take loans guaranteed by the Federal Government. It is only natural, then, for colleges to increase tuition so that they can buy nearby land, build more buildings, hire more administrators, etc. The Federal Government could have implemented policies that would have prevented this outcome. For example, they could have required colleges to be responsible for part of the loan if the student defaulted. This is not rocket science.
6
My high school students are quick to use the term racist when they feel they have been slighted by another. I am quick to point out the difference between individual ignorance vs. true institutional bias, which is intentional racism writ large.
This article is a sickening example of the latter--sickening because it is one of the few that made it to the light. How many other high level, legal, codified scams are still slithering under rocks in front of us?
Institutional bias is when lighter-skinned people live at the beach, while the not-so-white folks live farther inland. It's why band-aids don't come in darker hues, why Barbies were always blonde and blue-eyed...and why immigrants are left holding the bag when white businessmen (always men) profit.
Immigrants are easy to attack, marginalize, and prey upon- they can't fight back. And for many Americans, that's a convenient narrative: after all, immigrants decided to come here. It's not our fault if our system eviscerates them. If they only learned English, they'd be just fine.
But it is our fault--we allow it through political and civic apathy. Only through proactive citizenship will these things change.
119
Excellent point. We, immigrants, fund and rejuvenate the cities where we settle. All to be abused by every single institution and many of the light skin citizens.
14
@R Mandl
I guess one can see racism everywhere if you look. I noted that only 8% of taxi drivers are native born. So it looks like less sophisticated immigrants were taken advantage of by the system. The immigrants happen to have darker skin but that isn't the reason this occurred in my opinion.
12
@R Mandl I don't see anyone criticizing the people who made the decision to take out huge loans that they could not pay. Just as in the early 2000s housing boom bust, there is accountability on both "sides."
3
We keep on seeing repeats of this scenario: prices go through the roof on an item like a house or, in this instance a taxi medallion. Rules that protect the buyers/consumers are tossed aside or exceptions are made for that specific item. Thousands lose everything, the financial side flourishes and then the entire edifice tumbles down with disastrous results for all. But those who can withstand the blow are shored up, given money, allowed to make their excuses while the most affected people (customers or buyers) are blamed, in debt, and often ruined.
Just as there was no real reason for the mortgage scandals there is no real reason for this with taxi medallions. Time and time again we see the same chicanery: applicants told to lie on applications, debt bundled and sold until no one knows who owns it, owes it, or if it's been paid, and then the inevitable crash that damages the people who cannot afford to lose. And they are blamed. What Senator Warren said long before she was a senator about credit card agreements applies to other areas: no one should need a law degree to understand the terms of a loan, or an agreement. And when lawyers can't understand it we're in big trouble.
When creditors are careless with their loans they should suffer the consequences. When they lie about the loans or withhold information they should suffer for it. We should not bail them out. We should be bailing out the victims.
5/19/2019 11:42pm
141
@hen3ry So don't take out huge loans you can't pay. I bought my house with a sizable down that took me years to save, not a 105 ARM. And it's paid off.
I drove a yellow cab when medallion prices were at their peak. I spoke with drivers on taxi stands all over the city who were doing their best to save for their six-figure downpayments, excited at the prospect of a more secure future for their families. Driving a taxicab used to be a good, honest living that afforded those less-fortunate the opportunity to truly realize the American dream in New York and other American cities.
I've moved on and away from New York into a much more secure career, but I often think fondly of those drivers I met. When I find myself discouraged, I find motivation in remembering their work ethic, optimism, and their kindness, but I'm saddened knowing that the rug has been pulled out from under them. They are some of the best people I've ever had the pleasure of knowing, and I hope they can find relief from this industry that has done nothing but take advantage of their vulnerability.
196
@AK Well said! I drove during the years of the Nixon recession and found the other drivers, many of whom were from Haiti, impeccably honest, caring, kind, diligent and hardworking. I was fortunate to happen into a job that didn't require seven days/week 12hr. shifts, but have always missed working with them. Taxicab drivers deserve the utmost respect and consideration! Letting their lives be destroyed by loan sharks is beyond despicable and the City should put a stop to this.
9
I don't understand the basic fact that taxi medallions, which are basically a permit to drive a taxi, can be bought and sold. Do any other cities allow that? I remember that Chicago and Boston had medallion systems, but they were abolished decades ago. My city simply issues a permit, based on a driving license and record, for less than $35. The vehicle is subject to standard safety inspections, and the safety record of the driver is reviewed on a regular basis. Why was this medallion system created, and why is it allowed to continue?
292
@jrrsunvalley Only a handful of cities still have medallion systems. They were originally created to reduce bureaucracy, e.g. by letting the city avoid having to process 20,000 renewals each year (in an era long before computerization existed), and also cost maybe fifty bucks. The problems came when NYC stopped issuing new medallions for nearly FIFTY YEARS, despite the city's growth.
As for why they still exist, that's the likely subtext of this story: they exist because they served as cash cows for their owners, at least until Uber came along, and these exceedingly rich people donated large amounts of money (including the current mayor, back when he was running for office) to ensure the status quo remained in place. The net result is obviously a disaster.
Yes, NYC should unquestionably convert to an annual permitting system, but first they have to figure out the problem of how to bail out all the poor cabbies who invested their life savings into medallions worth less and less by the year. (And I don't think there's any solution here *other* than a bailout, at least for individual owners.)
91
@Jeff Thanks. It made no sense to me.
8
a taxi is a car plus a taxi medallion. without the medallion, the car cannot be a taxi and cannot carry paying customers. medallions were invented to control the number of taxis in any area but they turned into speculation instruments. we had the same problem here in Hong Kong except that here, most medallions are not owned by individuals. the value of the medallions has no relationship to the value of the services provided by the taxi.
18
re:no sympathy for the taxi cab industry
Why should the price of medallion have been allowed to go to 1M in the first place? If not for interference by( city) government the price of medallions would never have gone to ridiculous heights.
The IRS should have cracked down on taxi cab drivers who bought medallions for a million dollar and the reported income of 35k.
Why should old people have to wait for a dirty yellow cab in inclement weather when with an app they can order a clean cab with Uber.
why didn't the the yellow cab create a good competitive app?
why did yellow cabbies avoid harlem and the other boroughs?
I have no sympathy for an out of date industry which mistreated the general public for decades.
6
The City issued licenses which were created, and administered, under an assumption that taxis were the only widely available car-hire service.
This supposed oversight was laughable. Every resident of NY knew, for years, that the state of taxi service was deplorable - filthy, foul smelling, dangerous, unavailable for evening rush, cabs piloted by drivers who often spoke little functional English.
Yet even today our elected officials defend themselves for how they handled their supposed "oversight."
Instead of leading this series with victims - drivers who thought may the streets of NY might still be paved with gold- the Times could help by explaining why the Government falls down over and over - the subways, the homeless, the public school system, public housing, the MTA's overtime, and so much more. How about the current NYC public school free lunch program - EVERYONE gets a free lunch, literally, so the kids who need them aren't embarrassed...
This whole series should have been entirely focused on the TLC, and the flow of campaign monies. In the meantime, the disgruntled taxi drivers should be suing the City and the TLC, over and again, until they find a case that gets them traction.
Unfortunately if they were to win, we'd all be on the hook for whatever penalties would be imposed, one more price for a having elected incompetent officials.
5
I'm a life-long New Yorker. Born and raised. I have grown up with the taxi drivers in this city. Have seen them go from white to black to now immigrants, some from parts of the world we've unfortunately become afraid of. I've talked to them all my life and enjoyed our conversations: about family, home countries, politics. A year ago I started hearing from the older guys that their plan was to sell their medallions and use the money to retire, but their retirement money is gone, their medallions no longer worth anything. Some have lost their life savings, can no longer take care of their families. Some have committed suicide because of this.
The MTA has now put an added tax on their taxis; the price is no longer affordable. Less people are taking the cabs. Tips are practically non-existent due to the extra $4.00 per ride, of which the driver gets $0. Our state and city governments have not helped them compete with car services like Uber and Lyft. They've left them out to dry.
Way to go guys, I'm talking to you state and local gov't officials. Way to protect these drivers. who serve us so well. Way to protect the American Dream. Way to protect the citizens you serve.
11
@ez For years we all understood that only a Yellow Cab was allowed to pick up a fare on the streets of NYC. The cab had to be in possession of a medallion, which was never inexpensive, the fares were set by the city as were the locations where a driver could pickup a fare, then woosh! it all changed--the city sold out the cab industry and it's drivers and welcomed Uber, Lyfts etc. Anything goes now but not for the Yellow Cab driver who is being crippled by the never ending extra fees the city tags on to the cab fare. Is it the aim of the city to destroy this business? It sure looks like it.
1
There are some places in the economy where only the government can provide, should provide unbiased oversight to protect the common good. On the other hand government created and maintained cartels like taxi medallions only serve to protect the few. It’s similar to how tariffs protect ineffective and inefficient incumbents enriching them at the cost to the public. Much like domestic sugar producers the taxi medallions are a scam. I am sorry for the medallion owners plight but everyday businesses close due to competitive pressures and innovation that renders them obsolete. The country cannot payoff every owner caught in the vise of competition.
4
This industry was set up as a protectionist racket, and when "disruptive" technologies appeared, its protectors failed to protect it.
That is the problem. If the artificial market had been upheld, these drivers would most likely be fine. I still don't understand how and why Uber was allowed to evade regulations.
As for the poor immigrant drivers, I'm of two minds. Most immigrants I've known (I'm one myself) tend to be debt-averse, If you ever meet my father, he'll tell you all about how he passed on buying a now-prime piece of NYC real estate because he didn't have the cash on hand and refused to take out a mortgage. That building is now worth 40x what he would have paid 25 years ago. So he missed out on wealth too.
2
@Am
However there were many immigrants who bought three years ago and got killed as prices are falling.
For many years taxi drivers made money and also saw their medallion go up in value. However new technology came out with Lyft and Uber and killed the valuation of the medallion owners and has caused major traffic problems. Either a new fee should be initiated by the government on Uber and Lyft to help pay for the MTA {instead of having a fee for congestion pricing} or they should only be allowed to operate four days a week and all of a sudden traffic will be decreased. There are thousands of extra vehicles out on the road and this is causing delays.
1
America is no longer a dream...it's a dangerous place where you are preyed upon if you are lucky...
1
@Ardyth
Yes, of course. We should go back to the days when every immigrant, no matter how carelessly they chose to invest their life savings, was guaranteed a successful outcome. Oh wait - those days never existed.
@Ardyth
That's it. The level of corruption is simply staggering. Ruthless and unforgiving!!
Will these bankers ever go to jail for a significant time? How many times will they walk away from destroying lives and thinking about nothing but their bonuses?
Sickening.
8
Surely more government regulation over markets would solve this...ooops!
Credit to the writer, he almost pulled off the near impossible task of making NYC taxi drivers, that paragon of courtesy, honesty and superior customer service mildly sympathetic.
2
Michael Cohen, yes that Michael Cohen, owned 10 medallions until his conviction when his status as felon precluded his ownership.
Would be an interesting side bar to know how much he bought and then sold his medallions for and the details of the purchases and sale.
5
So the mayor outright steals from the hard working people of “his” city to cover his incompetence and help his lender-political-friends. If so, who can impeach or jail this fraud and friends?
1
@Nei
Economy in NYC is strong . Most waiters mKe 2000 a week. Lol , people didn’t see Uber coming. That is why cans went down in value.
This country is falling apart. Nothing is safe from Trumpism as we all know by now. We have more cheating than ever. Every time someone tried to protect workers someone else ruins it and creates more desperate people. What is the matter with this country. I supposed people see what the president can get away with and that's plenty. He is no example of honesty. He lies every time he opens his his ugly mouth so of course bankers saw an opportunity and cheated poor people. Isn't that the way it goes. We have become one of the most corrupt countries in the world and don't kid yourself about that.
@BKC - This began well before Trump entered the political scene. No need to blame him. He certainly has his issues, but those who were involved in this at the top had political connections from Albany to NYC and had ZERO to do with Trump.
If anything, this is how the mob operates. And the mob's ties generally are linked to Democrats.
However, in this case, there is plenty of blame to go around to politicians from both parties.
4
Consumer Financial Protection Bureau -- do they have anything to say about this tragic story? (not just current management but Cordray too)
This is the real reason cities resisted Uber. L
2
Now the city is making the taxi drivers suffer more by imposing a tax that does not help them but kills their business.
Great work Democrats! And I'm one of you!
1
I wish the Times would look into Closed Cooperatives, in particular, the various Sugar Beet Cooperative throughout the country. You can only grow sugar beets if you own cooperative shares, but you can only buy shares from someone that already owns the shares. (or lease shares)
Seems to me that this would limit a persons right to grow what they want and give unfair advantages to those already in the coop. Similar to medallions.
4
Forgive the loans and put the loan charlatans in jail.
2
This really shows how dumb and inept our public officials are, from Giuliani to de Blasio. How completely ridiculous, particularly when one notes that this happened AFTER the financial crisis of 2008. Dumb and inept, of course, are probably covers for "in on it" and "complicit." Which is just as likely. They should all be ashamed; the entire TLC should resign if they had any sense of honor. It's pathetic how they all point the finger at someone else: "But he said" "Oh but they said" etc. etc. The bankers in this of course are simply doing what we can expect from people who long ago gave up any sense of right and wrong, driven by the almighty dollar. But another report in today's Daily News bears mentioning here - an analysis showing that "the average money brought in by medallion taxis dropped by almost 30% from 2013 to 2018" thanks to Uber and Lyft. While the TLC says it sought to improve things for the riding public, it obviously missed the ball entirely - the tech people rode in and ferreted out the remaining value. A perfect storm for the taxi driver who, unsurprisingly in the face of these incredible forces and powerful interests, are blamed for their suffering. A lesson to all: NYC is full of con-artist sharks, the lead one now occupying the White House.
1
Am I the only one who doesn't care about this?
As the first installment made clear, plenty of medallion owners refinanced loans and paid for houses and college educations with the proceeds while the value of medallions rose. Near as I can see, not a single law has been broken--nothing to see here except capitalism. If drivers ended up bankrupt, perhaps they should have done a bit more math on the front end before taking out loans. They didn't know they were taking out interest-only loans? That's difficult to believe. You can't fix stupid, and math knows no cultural barriers.
Beyond this, it is difficult to feel sorry for an industry populated by smelly, dirty cabs and drivers who are either rude or spend their time talking on cellphones without even acknowledging there's a customer in the back seat and pretend to have no change in hopes of landing big tips on top of already-expensive fares. That's too-often been my experience with big-city cabs.
I'm supposed to have sympathy for folks who lost out hoping that medallions would be a license to provide poor service while gouging when the opportunity arose? Sorry, not biting. Uber and Lyft are worlds better, and if we save the world for yellow cabs, we'll be right back where we started.
Not sure what it is with NYT, which keeps publishing stories on how awful Uber and Lyft are while running stuff like this. We don't need a weatherman, or in this case, a cab to know which way the wind blows.
7
How much is a medallion worth today? I couldn’t find that information in the story.
1
@Julie, Read the part 1 of the series. At its height of the bubble, medallions were valued $1m+, but have since lost 90% of the value.
2
This series should definitely win a Pulitzer Prize. The reporting is so incredibly detailed and engaging.
3
This is entirely Mayor Bloomberg's fault.
This great "businessman" let the taxi medallion industry become as overinflated as the mortgage industry.
For 12 years Bloomberg had a chance to stop this and use his so-called business acumen to prevent this disaster.
Instead, we now find out that Bloomberg was a fraud. He used NYC to enrich his buddies and help Manhattan while ignoring the rest of the boroughs.
What a fraud. Mayor de Blasio didn't pretend to be a great financier, but Bloomberg did and Bloomberg had 12 years to do something and instread he made it much worse. Shameful.
Good on the NYT for finally doing an exposé on this. Lost in all the “woke” banter decrying Uber etc. was the fact that taxi medallions are simply a government sponsored racket used to suppress driver earnings and increase consumer prices, with all the extra “fat” going to the often-colluding power brokers (the financiers and the regulators).
It’s totally despicable to me that de Blasio has thus far decided against bailing out the medallion loans of poor drivers who purchased them before the city de facto changed the terms of their contrived value by allowing ride sharing services into the game. He’s a monger of woke platitudes that has helped no one if it isn’t expedient to a good photo op.
1
yet another example of our government's failure to govern for the people.
2
@e
"yet another example of our government's failure to govern for the [taxi drivers]."
There. Fixed it for you
2
Well, one thing you can say is that these lenders are not quite as bad as the Pharma companies, who extort diabetics with insulin so expensive that you either die or go bankrupt. America the Beautiful.
3
I can’t stand reading another story about people ripping each other off. It’s not the exception anymore now it’s the rule and fitting in a country with a rule of law that’s what the law has proved its worth for.
1
The primary cause of this disaster is the government-imposed monopoly of taxi medallions. Yet the author is demanding that the government maintain the monopoly, and regulate it "better" (somehow).
Here's a solution the leftist/statist author will never dream up: A Medallion Buy-Back. NYC/NY State buys back all the taxi medallions sold, pro-rated at 10% per year, or something more mathematically correct. If a driver has had their medallion for 10 years or more, they get nothing back.
After the buy-back, taxi medallions would no longer be required to operate a vehicle to take passengers on a trip for a fare. In addition, no one would have to be part of a union, and no one would have to charge a specific fare.
In the early 1800's, Cornelius Vanderbilt's ferry company drove the price of a ferry trip across the Hudson to ZERO. Cui bono? The passengers, not the government. Vanderbilt's approach is what all businesses should aim to achieve: consistently lowering prices year after year.
And that's what a government-imposed monopoly NEVER does.
3
and a decade from now, when self driving cars are dominant, the headline will be about Uber and Lyft stock holders and drivers losing their investment and livelihoods.
Today's hurting medallion owners should scrimp and save and buy the first iteration of self driving cars and sit at home with a pair of synced 40 inch monitors networked to the fastest and most robust internet available and put his self driving car on the street supported by the most secure app available.
disruption is the future.
This is what is so characteristic of "friendly fascism", corporations and government working together with the people as pawns and prey. The friendly part is that there is no violence and the public is not aware.
Thanks to Brian Rosenthal for shedding light on this dumpster fire.
The article is a metaphor for all that is disheartening in the NYC and US economy since 2000. Everyone involved in creating this speculative market was getting their piece of the riches all along, turning a blind eye toward the inherent long-term risks. The T and LC created scarcity. The political leadership encouraged medallion selling to gain revenue. The Muirsteins cynically innovated new financing structures and dumped their exposure before the collapse. The financial regulators proved inept and corrupt, again.
The immigrant borrowers are the latest victims of the delusion that getting rich is as easy as winning the lottery or owning the next sure thing asset. Examples include: owning mineral rights in fracking states, trading dotcom stocks, flipping houses, or buying bitcoin, every boom provides excess returns before collapsing to the mean long-term return.
New York, New York...
What type of person would pay $800,000, plus maybe the price of a car, just in order to earn the paltry wages of a cab driver? What were these people thinking, if anything?
5
I hope there is criminal prosecution that can be brought against some of these people, because the behavior is absolutely criminal as well as predatory.
2
I found the most jarring thing in this article to be that there is a Mississippi Credit Union Hall of Fame.
3
In my experience, half the drivers are rude and try to cheat by getting to a destination the long way.
The Sad thing is these people who manipulated the system will never go to jail
1
Last year, a different reporter wrote an article about a man who gave 350 of these drivers each a $1,000 check. I reached out to the reporter and she connected me to the son of a driver who had taken his own life.
I was able to write checks for three drivers. I encourage anyone reading this article who has the means to do the same. Just reach out to the reporter of this current article. I'm sure he can connect you.
These extraordinarily hard-working people were dumped on by predatory lenders, and then again by the DeBlasio administration.
I'm going to write some more checks this year, and continue voting for politicians who support a living wage. Count me as one of the people who was glad to see the Uber IPO tank.
2
A factory worker, tired of long days, slave wages, and torturous labor, decides that he wants to become his own boss and open a Lithuanian restaurant to serve his neighborhood.
Being a good citizen, he researches what is required to open "The Medallion Cafe" and finds that licensing, inspection and compliance fees come to $800,000. Cognizant of the risks and how long it will take to pay off, he decides that a loan is the best way for him to follow his dream of financial self-reliance. He talks through the different options with his local banker who helps him get a loan for most of what he needs and secures a very fair interest rate and payback schedule.
Diligent to the law, he builds the Cafe exactingly to code, has it examined by ten different examiners (from the fire marshal to the health and building inspector) and 12 months later is granted his license and opens for business.
The same night, a competing chain restaurant opens in the basement apartment across the street named UberBites. It doesn't have any licenses or inspections, hires anyone to cook its food regardless of health training, and works its staff (which it calls independent contractors) 18 hours a day.
The cafe owner goes to the City Hall to complain and is told that they're is looking into it, but it never does anything. Five years later, UberBites is making billions going IPO, while The Medallion Cafe is shuddering its doors.
.... and somehow the banks are supposed to be the villain in all this?
4
@JSD This hits it on the nose, the city changed the rules and is responsible for the the destruction of an industry and the devaluation of the investments of countless hard working drivers. It's immoral and should be criminal.
I’m curious. I wonder how many immigrants looking to buy taxi medallions took a look at the terms ( predatory as many were) and said, “I’d have to be crazy to do this! No way!!” And then walked away!
My point is just because someone is an “immigrant” it doesn’t automatically make him/her a dupe!
Immigrant or “old resident” many people don’t go through due diligence done on their own or with the help of someone experienced in these matters. And for a $700K loan, it’s wise to beg or borrow a few bucks upfront to make sure you aren’t signing your life away.
I am not in no way defending repulsive predatory lending. The borrower bears as much responsibility in this though, because he/she signed on when many others saw what it was and walked away!
When you buy an expensive house, most people hire an “engineer” to inspect the house for defects before they sign on the dotted line. No difference here with the medallion financing. A professional needs to look at the terms. It’s crazy not to do that!
1
Now I understand why NYC business people encourage lax immigration laws. People maxing out credit cards? Seems conventional lending institutions got their cut too.
1
At every turn it is banks and bankers who are raping our country and it's hardworking citizens of their money out of abject greed.
We need stronger regulation and severe penalties, not fines, but jail time.
And they need to have greed counseling. It is no different from any other addiction, gambling, drugs, sex.
Greed is a disease that needs treatment before we are all sent into bankruptcy.
Forgive the loans because this is an obvious case of highway robbery.
3
Sitting on the GWB bridge right now, I almost wish I could hop out and get in a cab.
Kudos to the NYT for providing more excellent journalism!
@VLB
You wouldn't get there any faster. The cab would be stuck in traffic too (just like you in your car).
1
@VLB
OK, but if you were in a yellow cab, you would be drenched in sweat (because the driver would pretend the A/C didn't work); the cab would be dirty, decrepit (because the drivers don't clean them); and the driver would be on his cellphone (yelling at his wife back in Bangladesh), instead of paying attention to traffic.
Consider yourself lucky.
1
The counter-reality of banks not making loans secured by taxi medallions is not a world in which poor cab drivers get to pay less for their medallions.
It's a world in which poor cab drivers are wage employees of people and companies who can self-finance their medallions and get to enjoy the excess profits earned by the drivers.
5
Well, who knew. Or I should ask: Is anyone surprised that banks ripped off well intention-ed customers? For me, the real question is: Why didn't any government department in any level track and insure that this huge change in the transportation sector monitored and control these kind of shenanigans?
8
@Gary I don't think the banks deliberately made bad loans, i.e. loans that could not be repaid. There was a spate of that about 11 years ago now, but that was extreme. The banks didn't anticipate Uber, etc. any more than the cab companies anticipated them.
HOWEVER, BTW, it was not "just business as usual..." The government failed to regulate Uber, or protect the taxi business, and so was totally complicit in the failure of the taxi business.
That kind of cooperation between business and government is known as CORPORATISM (aka economic fascism)...
@Gary That's capitalism!
@Richard Savary Your point is taken but it is what it is - and it's another reason that money is the only power left in this country.
1
The best solution is to create an NYC Drivers Union RideSafe App. Uber and Lyft are not the solution. Customers are.
What would serve customers best? I think people that are driven to the places they want, and need to get to, actually care about the nice driver that got them comfortably with low stress from location point A to destination point B.
Sometimes pleasant conversation or respectful silence is warranted. Drivers share a space with the good folks that they transport for a time. I don't think that taxi customers would ever want their drivers to be bankrupted or indentured.
It might be a good thing for all to create a safe app for a new NYC Ridesafe App. What would serve customers best? And the critical drivers that need our support and social security. The bankers and grifters have already profited. No more.
2
We have a history in this country of immigrants starting their own businesses because all they could get were terrible jobs, so I am not surprised that many people saw owning a taxi medallion as a way to move up the economic ladder that wouldn't take a generation or two. What does surprise me is that after all the hard-fought battles to enact fair labor standards a hundred years ago, that we are letting a new generation take advantage of recent immigrants. Why would a person not want to be a taxi driver working for someone else? Maybe it was the 12 hour days, the six days a week, the lack of a living wage, or the lack of benefits. Immigrant employees are called "contractors," even when they are really employees, or they are farmed out as employees to a third party, like Donald Trump's employees. Just like the nail salon workers, taxi drivers deserve decent working conditions. Maybe now that your paper has exposed the truth, NY State and City will fix this injustice.
11
A government license to enter a profession should never be a speculative venture. The holder should pass the necessary test and demonstrate the applicable skills. Any licensing fee should be enough to cover the relevant paperwork and administration but not become a source of profit. Are you allowed to buy your medical license from a retiring doctor ? Of course not. This scenario, in which taxi licenses are treated as assets to be bought and old, invites speculation and price gouging.
4
@Joe
The difference is that we don't purposefully limit the number of doctors we license. The Medallion System is just a Cap-and-Trade program, which we accept in plenty of other places where we want an industry to find the most efficient use of its resources while limiting its externalities.
The only other way we could limit the number of cab's on our city's street would be to create decades-long waiting list for a license. Anyone qualified could get one, but would have to wait their turn.
3
Medallions became commodities decades ago and they were incredibly high priced commodities too. Then along came Uber and Lyft. Totally changing how people get rides and cratering the value of those medallions. Instead of queuing up for a ride at a taxi stand or trying to flag one on the street in Manhattan a few taps on a phone app and in minutes I've got my ride and I can wait in comfort for that ride. The other reality too is that the Uber/Lyft cars are cleaner and more comfortable than ANY cab I've been in the city. With a fixed fare if I'm stuck in traffic I'm not watching the meter spin up and up and up. The industry refuses to adapt, refuses to change it's paying the price. In addition to predatory lenders, these medallion owners are victims of an entire industry that lives in a fantasy that they can turn the technology clock back.
Its also important to note that the security of Uber and Lyft drivers is enhanced by them being cashless and that those that call them can be accurately tracked by the phone too. Not perfect, but why rob a guy with no cash?
6
If they can't make the payments, the taxi drivers should declare bankruptcy and let the banks suffer the consequences of making bad loans.
7
@Al Bennett Many drivers *have* declared bankruptcy, and a number of the credit unions that offered these predatory loans have gone under, thanks to the collapse of the medallion bubble. The problem is that -- unless you're Donald Trump or someone who knows how to "work the system" by shielding assets behind fortresses of LLCs and the like -- bankruptcy is financially devastating for average joes.
Declaring it makes it effectively impossible to obtain *any* variety of loan (excepting "payday loans" with usurious interest rates) for close to a decade -- along with losing any type of access to obtaining credit cards. In some states banks require people to sell ALL of their assets, including their homes, to repay their lenders. It's also increasingly used by employers as a means of disqualifying job applicants.
Those who declare bankruptcy almost invariably suffer far more than any bank might.
4
@Jeff
"In some states banks require people to sell ALL of their assets, including their homes, to repay their lenders."
This is not true
1
Yet another example of the transfer of wealth from hard working moderate income people to the financial sector. And another example of how deeply embedded these financial interests are at every level of government. This guarantees the total failure (or will) of government to protect these drivers from predatory brokers and lenders.
7
This is just one of several clear examples of unfettered, unregulated capitalism. We are in desperate need for real change in our country to help the working and middle class. Please take note of D candidates that refuse bribes from lobbyists and PAC monies. If you want real change, how a candidate is funded is crucial.
6
@Sue Salvesen - I would suggest that this is a clear example of government cronyism/favoritism. Original holders of the medallions probably loved the protection that the limited availability of medallions had to offer by restricting competitors, thus allowing them to charge more. The market should have been opened up a long time ago, allowing more competition and cheaper fares.
I don't quite understand the process though - if a medallion is required to charge for rides in the city, why are all these new ride services allowed to operate? Why didn't the city just scrap the medallion arrangement years ago and just have some basic oversight and rules - register the identity of the driver, basic background check, post prices clearly where the passenger can see them before the ride, and a resolution process. Done. Prices can float with supply and demand.
5
@Sue Salvesen...yes this case and other abuses should be discussed constantly on TV cable news.
They can relate it to how our politics is dominated by big money donors--and the unregulated capitalist norms they set in our society---giving a green light to criminals.
This is all implicitly approved by our Supreme Court that called big money donations 'free speech' protected by the 1st Amendment. Thus big money values call the shots in our politics and our society.
Our media hardly every discusses this huge influence in the politics they do report.
1
LaGuardia signed the Haas Act in 1937 and the number of medallions was kept artificially low, and at the same number, by politicians, for six decades. As recently as 2014 there were only 13,605. This isn't about capitalism. Capitalism needs a free market to work. To Louis Gudema's point below, government licenses should not be marketable assets.
3
@Working mom
But they were kept artificially low for a reason. It wasn't to drive gouging prices; it was to keep a hundred thousand cabs from clogging our streets.
Inside the artificial monopoly, capitalism worked just fine and there was a healthy free market for the rare resource of a Medallion, evidenced by banks' willingness to make loans based on the future value of Medallions.
The problem was that the Medallions had synthetic value (i.e., their worth was dependent on the good faith of the City government that it would continue to enforce the rules that gave them value). When the government refused to honor that value, the market crashed.
4
@JSD there is a chasm between 100,000 and 13,605. And over six decades that number should have been re-evaluated to keep medallions from sky-rocketing.
@Working mom
Have you been on a New York city street? Trust me when I tell you there aren't too few cars here.
You are arguing about artificially lowering the cost of Medallions by increasing the supply. Basically we should flood the street with cabs until Medallions are cheap enough that anyone can buy them without a bank loan.... Does that sound like responsible urban traffic policy to you?
1
In business the regulators all, eventually, are run by the regulated.
1
@Ak.... what's regulated' is the US govt. Govt agencies and politicians are regulated by business, instead of elected govt of a democracy regulating business.
@Ak Unless they are small potatoes.
"In order to buy medallions, drivers were taking out loans they could not afford."
Perhaps that's the fault of the NYC-created-and-imposed monopoly of Taxi Medallions? Perhaps it's because the wonderfully gifted and intellectually blessed pols/bureaucraps wanted money they didn't earn?
To misquote Reagan: We're the government, and we're here to ruin you.
7
The taxi regulators were bought out by the industry to do nothing. Seems to me more of a story of state capture and unfeathered greed.
2
This article amplifies why people distrust reporting today.
First, the people buying the Medallions and the banks financing the purchases were acting rationally based on the facts at the time. Taxis in NYC had a quasi-monopoly on the market (exception was the limo for hire companies) which was controlled by the Medallion process. No one expected a massive disruption in the market (Uber and Lyft) and were assuming that the Medallions would just keep going up in value. Make no mistake, at the heart of this was greed on everyone’s part. The market was ripe for disruption. The taxi service was awful, you could not find one during peak hours because for some mysterious reason this is when they would do shift changes.
Secondly, there was no credible data presented that the financial problems were isolated to immigrants - though every story suggested that anyone who bought a Medallion was an immigrant - and a victim. My experience suggests that the owners - often with multiple Medallions - were the ones that got rich and hired many immigrants at low wages to drive the taxis. In effect, the government created a regulated quasi-monopoly that enriched some at the expense of many, mostly immigrants. Regrettably, some of these drivers tried to step up and become entrepreneurs at the wrong time - on the precipice of a major market disruption. They paid the price and the banks have as well. Blame anyone, blame a program that created arbitrary value in these Medallions in the first place
14
@Tom Johnson
They should have hired you to write the story.
Times pieces begin with the narrative that they want to spin then fit in the facts that advance the predetermined point.
2
They should make Uber and Lyft drivers rent medallions by the hour. Rally after charging some 800,000 these drivers compete with a Uber driver. Either that or return the medallion money and scrap the system altogether as a obsolete system.
2
Medallions may have been a good idea at one time and now have outlived its time of usefulness.
Radical change is really tough. That's why the citadel of the health insurance industry has held sway for decades. Protect the industries that do not serve us but must be protected. Because they hold political sway?
It may behoove NYC to start its own Uber/Lyft type rideshare app. I live in Plo Alto, CA. My city provides all the sewer, water, garbage, recycle, electricity and gas. Basic stuff. Transportation around NYC is basic essential services. Solve the problem and cut out the bankers.
Provide independent drivers ownership of the work they do. All that's needed is unique driver training in local territory, background checks, references, vehicle ownership, and insurance. NYC Driver unions can negotiate group health and retirement options. It's a win for the drivers and their families and workers everywhere.
Ditch the medallions and the corrupt bankers.
7
I find it hard to believe anyone thinks NYC isn’t the real culprit. It seems officials thought getting a million bucks for a medallion was reasonable. Takes a lot of nerve to promote sales like this and call it an investment. Seems more like a timeshare spiel. For a city that enacted rent control laws to protect people, this whole scheme seems like it was intended to rip off poor immigrants. NYC set up the program, allowed abuses to take place, and now blame brokers and loan institutions for the problems after It happened. Wasn’t anyone watching before drivers started going bankrupt, or is it the suicides that got officicials attention?
14
We need to reimburse the taxi drivers. The market for medallions did not spontaneously “crash.” The artificially low supply of medallions created this market and bolstered it up.
When Uber and Lyft started, they were breaking / circumventing the laws and creating more ride supply, thereby immediately deflating the value of medallions. It’s as if the government started allowing a new currency, creating massive inflation so that the twenties in our wallets became worthless.
I like the existence of ride share options. But we sold something of artificial value, then acted to strip it of value. That’s wrong. We should reimburse.
9
@Sara Peters But the Uber and Lyft drivers were just 'trying to make a better life' so that justifies the law breaking/circumventing doesn't it?
1
It is a bit odd to write such an extensive and well-documented article about the inflated value of taxi medallions, yet not to explain at all what the true value of medallions is or was.
Maybe back then, you could actually make very good money being a taxi driver, working 12 hours a day seven days a week. The value of a medallion is the difference between this income and working part-time at minimum wage (or even less) because you are not very employable, which the expectation that this income will rise because that’s how taxi fare were always (wrongfully) managed.
And maybe the real demise of this system is indeed that is was an inefficient monopoly that collapsed when competition entered. Suddenly when finding clients becomes very difficult you don’t earn much even working 12 hours a day seven days a week, and the regulator cannot really increase tariffs anymore. So owning a medallion is not worth much anymore.
I don’t think there is any doubt that ride-hailing apps hurt the taxi business, so that is a very credible story. The article could have looked into it just by looking at the income numbers and making some financial calculation. The whole story then looks different: it is the story of a ponzi scheme designed to enrich incumbents at the expense of the newcomers and the users, with a lot of pain when the whole thing collapses. A bit like housing, where the system is designed to keep prices rising, instead of being sustainably affordable and efficient.
11
Here's a crazy idea: government licenses (taxi medallions, liquor licenses, etc.) should not be tradable assets. They should simply be recognition from the government that the person/business meets the requirements and can operate. They should be issued at a nominal cost - that necessary confirm that the business is in compliance. Period.
34
@Louis Gudema
Indeed. It's baffling.
What I can never get past is how this is legal. It's the same laissez faire game of economic hot potato as the sub-prime mortgage crisis, but it turns these people's livelihoods into an anchor dragging them down into a financial abyss.
Valued at $1 million, let's say you make $20 an hour operating a cab with that medallion. It would take close to 6 years to pay that $1 million off if you had that cab working every hour, every day, with no breaks at all. And that would be without interest on the loan, or gas or maintenance for the car, or paying the other people who drive the cab their share, because we all sleep, not to mention things like food or rent.
(20 x 24 x 7 x 52 = $117,720. 1,000,000/117,720 = 5.723) My math here is obviously oversimplified, but I'm sure more accurate accountings of the true cost of a million dollar loan on someone's JOB would look even worse. How would a medallion ever be profitable at that price? It looks more like indentured servitude than a business opportunity.
What are we doing to each other? I'm so sick of hearing about greed and "competition" being good for this country, when it's all a scam. The games are rigged. Are there no more people with true character in our governments? And have the rest of us become too distracted to hold them accountable?
19
@DP
You can't really do effective payback calculations without taking into consideration the biggest future payment.
The Medallion also has investment value (or rather we should say had investment value prior to Uber) and could be resold, possibly at a profit, somewhere down the line.
5
@DP
This is absolutely the opposite of laissez-faire economics. This is the result of the government reaching in to the market to protect the profits those already in operation.
8
You're absolutely right. Thank you. I was thinking about how difficult it must be for people to understand the dangers involved in finding a way to make a living driving a cab or owning a medallion, and that term leapt from my thumbs.
It looks like there are so many protections for the institutions and guarantees for the connected, that the independent person looking to find their way has nothing backing them up. The term laissez faire is obviously inaccurate.
But if this is the way our institutions are going to be run, is there any difference for most of us?
Does literally anyone take responsibility for their own actions anymore? These teai drivers took out huge loans for these medallions thinking what?
Did they do any analysis to see if they could generate enough revenue from owning a medallion to justify the sales price?
Did they do any analysis to see if the loan terms were good for them?
What happened to agency, to owning up to your own mistakes, to not look to blame others for your financial misfortune?
Yes the industry shifting rapidly away from taxis to ride sharing has hurt these drivers tremendously, but let's face it they wanted the medallions in the first place because it was a closed market, that had ignored riders desires for decades.
Ask any customer which experience they prefer, the old days of praying the taxi would come, or trying desperately to hail a cab, then having to watch your driver not to take you on a longer route to pad the tab.
Or the current system where you know where your driver is via a real time map, where the price is upfront before you ever get in, where you have a record of what route they took should there be a dispute etc, etc.
It's a no brainer.
20
@Richard They were playing a government monopoly game that was pulled out from underneath them because central planning cannot anticipate the future any better than an individual. They were victimized by the original sin of charging poor taxi drivers so much for a medallion.
11
@Richard
Great comment. I would add that these cab drivers were participants in a racket designed to inflate the cost of transportation at the expense of the public. The worst offenders of this are the various "commissions" and local regulatory bodies which did nothing but legally protect the racket.
Ridesharing services have demonstrated that we the public have been overpaying for far too long.
16
@Richard - "Does literally anyone take responsibility for their own actions anymore?"
Short answer is no.
1
What short memories people have! Throughout the runup of medallion prices, it wasn't taxi drivers buying the medallions, it was investors, who rented them out to the people actually doing the work. Does nobody remember the scandal of rising rental fees and restrictive contracts requiring drivers to work longer hours for less money? Anyone running the price of medallions up by treating them as an investment, rather than the license to do business that it actually is, deserves to lose their money. And being an immigrant does not change that.
11
What short memories people have! Throughout the runup of medallion prices, it wasn't taxi drivers buying the medallions, it was investors, who rented them out to the people actually doing the work. Does nobody remember the scandal of rising rental fees and restrictive contracts requiring drivers to work longer hours for less money? Anyone running the price of medallions up by treating them as an investment, rather than the license to do business that it actually is, deserves to lose their money. And being an immigrant does not change that.
A damning indictment of American capitalism—
Which GREEDS itself to economic collapse, cycle by cycle, unless kept in check.
And here the “checks” were part of the greed.
7
Obvious corruption. For years. And will the wealthy who benefitted pay? Nope.
That's why the USA is in such dire straits - there is simply too much money - and 99% of it in the wrong hands.
8
@A "The wrong hands?" Who gets to decide who the "right hands" are and what are their incentives?
A dangerous game.
The American Dream in the making cheating one more sucker at a time. Perfect mirror of the NYC hustler mindset.
7
and again, the times puts no blame on the borrower who was irresponsible and borrowed more than they could afford in a downturn. What ever happened to making prudent financial decisions and personal responsibility.
13
@Justin
So is the lender ever at fault in your view? Or are the uneducated and poor just meant to be taken advantage of?
So, first it was American homeowners. Now, it’s immigrant taxi drivers. Do any big shot NYC crooks with connections ever go it jail?
10
Your sleazy Leftist evasion of the govts initiation of force is noted. Abolish economic controls. Cronyism will wither and die.
There is no egalitarian-altruist utopia where Leftist “good” intentions become reality. Ayn Rand has provided empirical proof of mans need for independent judgment. Leftists are not Plato’s philosopher-kings dispensing wisdom to peons. Each individual must use his own, independent mind. Hitler and Kant are wrong. There is no group mind ,no mystical Consensus. Man thinks alone.
2
@Sammy Azalea Well, they are sheep otherwise they'd not have overpaid for government monopoly medallions.
But central planning cannot work...it's hard enough to organize an agreeable option among a family reunion.
Low hanging fruit example from history.
Two words: “Rural Electrification”
1
@Sammy Azalea
A novelist provided “empirical proof?” I’m all for the free market, but I don’t support changing the definition of words so one can say ridiculous things.
1
This is an example of predatory capitalism and a direct consequence of regulators who fail to regulate due to political pressure or conflicts of interest. A bank will claim that the buyers of the medallions knew what they were getting in to, or that they had provided sufficient information to educate the buyer. However, many, if not most, of these buyers were immigrants with limited English skills and education. Even if highly educated, unless someone had a background in legal or financial matters, the wording on many loan contracts is dense and obtuse increasing the chance of, indeed facilitating, confusion. The lack of concern shown by elected and appointed officials for the people they were supposed to help and protect is a failure of government. While this is a pipe-dream, I would hope that the NYC and NYS gov't would take measures to mitigate the harm they caused for these families. Any wonder that NYC is a center for breeding ground for progressive Democrats?
4
Wonderful investigative work! More, please!
11
And so we also have a harsh lesson in Karma in that the lenders were mean to the NYC taxi drivers, but a number of drivers were mean to many people simply seeking their services, in that these cab drivers would refuse to pick them up, favoring other types of passengers. Thankfully, competition has totally changed the industry.
7
Candle makers, blacksmiths, chimney sweeps.... a lot of occupations have decreased because of progress.
Too bad.
5
@George Orwell No, these are the crafty occupations being urged upon those disaffected by "progress" conveniently available at your local big box or the industrial supply depot. Haven't you ever visited boutiqueville?
A masterpiece to headline this story with the banks, who surely profited, while naming not a single bank that profited, throughout the whole article! It is this kind of reporting, wherein the government and its regulators are named but the string pullers and profiteers, who butter NYT bread, are spared that distorts US opinion against government. Even when government is just puppets of private enterprise Banksters!
Thank you,
Stefan Brün
3
Terrible! Hey is the market up?
2
Assume for a moment that the loans were not bad, why would local government set up a system that kept hard working cabbies living at a subsistence wage level?
6
This NYC taxi medallion is another form of stock market's PUMP and DUMP but this scheme had the participation of the government. Same as stock,don't let be the last owner.
8
Caveat emptor. This mess was created by government intervention into a free market to limit competition. Since the supply was limited by the government, speculation followed. It always does. What solved the problem? Uber among others things. Now the small time speculators are looking for a government handout from the taxpayers.
7
Mark Twain was wrong. This isn't rhyming, this is history repeating itself, plain and simple. And just like the CDO/CDS subprime housing implosion, none of these unscrupulous bankers and bureaucrats will be indicted for anything.
Even worse, now that the bankers have acquired all the medallions from the defaulted loans, they'll probably lobby to have ride hailing services like Uber and Lyft banned from this city, thereby starting the whole medallion bubble all over again so they can reap another billion or so out of the system.
5
"Government agencies that were supposed to police the industry instead helped bankers turn it into their own moneymaking machine, The Times found."
This has become the background narrative of American life.
10
So glad that I no longer have to be humiliated by Yellow Cab drivers on the streets of NYC. I can swipe my phone to the App, & a cab would be waiting. Just saying!
9
@niel Copy that.
1
In this age of rapacious greed, with Trump as the poster boy and Republican no-regulation/oversight-ever-needed ("government is the problem")...Duh!
3
I hope he didn't pay a million dollars for that garage.
2
@john fiva
He did. And it’s the government and/or bank who is at fault.
The next time you hear criticism of Uber or Lyft, think of this mess.
5
This happened in a city where 'caring' Democrats run everything. The old saying"you can't cheat an honest man" may apply to Donald Trump as he managed prosper in this environment.. conning the cons.
3
New York City must compensate medallion driver owners including retribution for the psychological damage to their lives and families - The Attorney General must hold an inquiry and bring civic leaders, banks ,medallion brokers and everyone else who promoted sale of NYC Taxi medallions to justice. The City of New York should have ran advertisements on the risk of becoming a Medallion but it seems they only ran advertisement s to promote the sale . Victims must unite
5
@Norman Coelho
Yes, of course. And let's also get Rbert Mueller (he's available now) to start an investigation of why coffee costs $5 at Starbucks, when 30 years ago it costs $25 cents. I want to the government to get my money back.
Also, what is going on with the cupcake scandal? Those things used to cost 75 cents, but when they got popular, I bought a Sprinkels franchise so I could sell them for $5 each. Now that the cupcake market has crashed, what is the government doing to help me? Nobody told me that prices could fall!!
Why should I be expected to read the documents I sign?
2
I wish I had a medallion to sell a few years ago
1
Like Uber is completely blameless for the fall of the taxi. SMH
5
The city set up the trap years ago and it is time for the city to resolve the issue immediately. The ones who make money from the suffering are the bankers, lawyers, and city.
18
No one forced them to buy taxi medallions at astronomical sums, they apparently thought that this was an easy way to get rich. This is just a repeat of the Dutch tulip mania in the 1600s, when tulip bulbs went for astronomical sums. They should have taken a regular job, even if it meant working at a car wash.
They get nlittlesympathy from me, who landed on these shores with his immediate family, penniless, in 1939, and made it through work and not by pursuing the uick and easy buck.
8
@Giskander
These drivers work 60-70 hr weeks pursuing the American dream the best that they can. It's hard work. I also started with nothing and am now comfortable, however it gives me great compassion for anyone trying to do so, not disdain. What is about people who are in a very small minority, who get way ahead from nothing, to have such anger for anyone not achieving the same results?
6
@Giskander "No one forced them to buy taxi medallions at astronomical sums, they apparently thought that this was an easy way to get rich."
Seriously? The only ones who knew buying and selling taxi medallions was an easy way to get rich were con artists like Trump "fixer" Michael Cohen (who owned dozens of them at one point) and the predatory lenders who exploited loopholes in the law to lend money to people who mistakenly believed they could earn enough from them to pay off the initial loans.
Nearly all of the drivers in question purchased medallions for their own use (and only bought one of them), and they worked 12-hour days to pay off their loans and support their families. They weren't "flipping" medallions for a quick buck. Rather, they wanted to EARN a living in the most traditionally American way possible: hard work. And as prices grew higher and higher, predatory lenders kept conning them into thinking buying a medallion was still "worth it" -- and extended loan periods to 40 years or more to ensure they could keep deluding unsuspecting buyers into thinking they could cover the monthly payments, along with maintaining a steady supply of suckers to dupe.
How you warped this reality into a victim-blaming assumption that individual medallion buyers wanted "an easy way to get rich" is equal parts mind-blowing and shameful.
7
@Jeff
Grow up. You can't possible be that naive. Each of these guys thought they were going to make a bundle on the rising medallion prices. Gambles don't always work out.
6
Is this really a tragedy? Small business owners get loans everyday to help get their businesses get started. Sometimes, it is for basic equipment, sometimes it is for employee #2, sometimes it is for regulatory or licensing costs (like liquor licenses, manufacturing licenses, restaurant licenses, etc).
Are we upset here because banks extended these loans to give taxi drivers the ability to follow their financial goals into self-employment or is what we are really upset about is the City's refusal to enforce T&L rules against Uber and Lyft, effectively nullifying the investment all these yellow taxi drivers had made in reliance on the City commitment to enforce the law.
6
@JSD "Small business owners get loans everyday to help get their businesses get started."
Yes, and nearly every bank in America *other* than the small number of credit unions that lent money to buy medallions refuses to give loans for small businesses whose borrowers lack both collateral and strong credit scores.
"[I]s what we are really upset about is the City's refusal to enforce T&L rules against Uber and Lyft"
No. As noted at three separate points in the first part of the series, Uber and Lyft had nothing to do with the medallion bubble, and everyone The Times spoke to said the bubble would've burst even if ride-hailing had never been invented. They're not the villains in this tale.
(As an aside, this assertion is also false. The TLC regulates both Uber and Lyft to nearly the same extent as taxis and livery vehicles, and have done so since nearly the beginning. All ride-hail drivers are required to carry commercial insurance as well as chauffeur's licenses, among numerous other requirements. The only original difference was Uber/Lyft not having a cap on the number of vehicles they could use; obviously that's no longer the case.)
4
@Jeff
The Medallion System created an artificial monopoly to keep a gazzilion taxis and ride services off our streets. These taxi drivers (and their banks) relied on the value of the medallions to collateralize loans for them. When NYC decided "oh never mind... Anyone can be a de facto cab now", it crushed the value of the medallions.
If the City had kept faith with the people investing in medallions, there would be no problem. Instead, the City destroyed the value of the medallions by letting Uber and Lyft just disregard the requirement to have one, leaving the medallion holders with huge loans secured by a worthless asset.
This is on the City, not the banks.
1
@JSD I can only assume you haven't read the first part of this series, which plainly states that Uber and Lyft are not to blame here. This is not my personal view; it's the collective opinion of nearly *all* the industry experts The Times interviewed for the articles. Here's the direct quote about it:
"Over the past year, a spate of suicides by taxi drivers in New York City has highlighted in brutal terms the overwhelming debt and financial plight of medallion owners. All along, officials have blamed the crisis on competition from ride-hailing companies such as Uber and Lyft.
But a New York Times investigation found much of the devastation can be traced to a handful of powerful industry leaders who steadily and artificially drove up the price of taxi medallions, creating a bubble that eventually burst. Over more than a decade, they channeled thousands of drivers into reckless loans and extracted hundreds of millions of dollars before the market collapsed...
The medallion bubble burst in late 2014. Uber and Lyft may have hastened the crisis, but virtually all of the hundreds of industry veterans interviewed for this article, including many lenders, said inflated prices and risky lending practices would have caused a collapse even if ride-hailing had never been invented."
As the last sentence in particular makes clear, this is on the city AND banks -- namely the small number of credit unions that exploited a loophole to provide loans no normal bank would've ever approved.
3
this is surely despicable. but somehow I don't understand the buyers of these medallions. many drove taxis before, so they must have known what revenue to expect. take the interest rate and calculate whether at the end of the day enough money can be made. it doesn't require a whole lot if math.
also, what interest rate is it is you can service s loan with about $2300 per month and the loan is, say, $500,000, even if you only service interest payments. not that much about 5.5%. and according to this article most medallions were much more expensive, so the interest would need to be lower.
something doesn't add up...
So let's try it the other way round. Let's say the medallion cost $1,000,000 at 15%, that is $150,000 per year. Let's assume the taxi runs 300 days a year, that would be $500/day just to service the interest. That means 25 fares per day @ $20/fare, just for the interest. How many of such fares can a taxi do per day? The numbers don't add up.
And I just learned that driving a taxi is no fall back position to what I am doing now ...
7
@TT they were speculating on the price of medallions assuming that it would rise. Just like with futures on pork bellies...
1
@TT I don't think it's that hard to figure out. Many of the loans probably required payments of far less than 15% interest, at least at first. Meanwhile, the drivers were purchasing something that had reliably increased in value, and they could see the rapid increases happening around them. If the medallions continued to increase in value, then the worth to the purchaser would exceed the interest paid and would allow the purchaser access to a closed market for taxi services -- not a bad deal.
We now know several things they didn't. One is that the value of these wasn't increasing organically. Another is that Uber/Lyft were about to disrupt the industry. Another is that the city was pumping new medallions into the system and that the pricing models weren't properly registering the effect of this move. And last but not least is the ability of so many, including brokers and regulators, to profit from the medallion market, thereby virtually assuring that medallions cost more than they were worth.
It's easy in retrospect to say that taxi drivers should have seen this. But one shouldn't have to understand that much about finance to contribute to society.
2
@ChicagoMaize
Get real, please. If the loans go at 5% for the first 3 years and then balloon, you kind of know what you are getting into. And this still requires you to pay about $160/day for interest payment only. That is $3200 per month. Sorry, that's a lot of money. Add to that payments for origination fees (probably financed), car maintenance, gas, and the fees to Hackney, and I don't see where the money to live from would come from.
Also: The price for medallions has increased 30% per year for several years. Ever heard of an asset that appreciates that much?
The people described in the article might not have been that well versed in English, but they were not described as stupid.
1
The seeds for this disaster was sown many decades ago. No licensing authority that issues licenses and creates a quasi-monopoly by limiting supply should then allow the purchasers to freely transfer that license to another party. Licenses must be returned to the issuing authority to be sold to the new party at the authorized price. Users may sell their business at any price they wish, but licenses must be returned to the issuing authority.
18
The same thing happens in Ottawa Canada when uber came in the taxi licenses that the city looked after but were sold by brokers their value disappeared.
3
@TERRY CUNNINGHAM
The 'licenses the city looked after'????!!!! Did you READ the article?
The city was not *looking after* licenses - they were acting like a crime syndicate - in violation of existing laws and protocols - and in the absence of any of any oversight whatsoever!
Their scheme would have imploded at some point, regardless of the competition from Uber.
Please re-read the article if you are unclear on this.
1
Please don't talk about this in the past tense. The recent City Council vote to cap the number of Uber, Lyft, etc. vehicles demonstrates politicians' continued interest in this space and was an attempt to prop up the industry that has funneled so much money to the politicians over the years. The medallion system has been a boon to politicians but at odds with the interests of drivers and riders for decades. The city should do something to help out the drivers it has harmed. Then it should also get out of the business of legislating in this area.
9
Financial corruption is kind of a New York specialty. Many of us know that New York is actually not a liberal place, but conservative. The only thing is that the party in power gets the fruits of corruption. So the political fight in New York is not about conservative vs. liberal policy but about who gets the money.
This is why a New York politicians should be avoided in national politics. You can see how it has turned out with Trump. Trump is surely more openly blatant, but he is not dissimilar in intent to any other politician in the state of New York.
14
This is a great piece of evidence in showing why the Ride Share model needs to succeed. Our corrupt government bureaucrats will inevitably bury us in regulation so that the bureaucrats increase their power and wealth.
Why in the world would a simple taxi license be worth a million dollars? We the users of those services have been paying off the bureaucrats for years. Driving a taxi should have a small upfront capital investment of $30K and you are in business. But no, the taxi driver is robbed of $1,030,000 and who pays?
We need to insist that the cities adapt to the fair and equitable Ride Share model. We need drop off zones and driver waiting zones. Just think how how many thousands of cars have been taken off our streets. We need to do it now so that when the cars are all electric and/or driverless we are ready!
NYT gets it wrong once again, the city did not fail the taxi industry, it is failing the riders! We need to demand better service from our bureaucrats!
6
and no mention of Michael Cohen and his family members' involvement in the medallion scams? Cohen declined to participate in a bargain with the law that would obligate him to admit to crimes other than what was being investiated in his relationship to President Trump, and could involve other people's crimes as well. and perhaps some of those people were even more unsavory that Cohen, who also claims to have lost a fortune in the collapse of the medallion bubble.
2
@Pottree Not that I'm even remotely defending the man, but Michael Cohen owned a couple dozen out of 13,000+ taxi medallions. He's essentially a footnote in a vastly larger story in which he played a minuscule role.
This story isn't about Cohen or Trump; it's about an entire INDUSTRY that actively defrauded thousands of innocent purchasers.
1
Why would DeBlasio and his NYC regulators want to put the breaks on this. Every time a medallion traded hands for $1 million plus, they collected 7% sales tax. It was the same with the real estate bubble. New York collects sales tax on one bedroom apartments that cost over $1 million, and on top of that they collect "mansion" tax on any real estate over $1 million (which in New York can even include a simple parking spot.)
For all their talk and sense of outrage, the politicians are feeding on this.
8
I'm deeply chagrined by the amount of victim-blaming in the comments, especially the ones essentially arguing that "this is how capitalism works." That's roughly akin to Trump justifying his now-well-documented tax-return falsehoods by saying he's "smart."
In both cases the main irony involves parties taking *advantage* of a core element of our capitalist system, possibly to an illegal extent. In this one, thousands of taxi drivers were unequivocally duped by unscrupulous brokers and credit unions into buying medallions under false pretenses -- by lenders who hid "minor details" like the payments on the loans only covering the interest on them, not the principal.
All of this could very well constitute a criminal conspiracy -- which I say as a lawyer with expertise in how loan disclosures are typically required to be disclosed to borrowers. At the very *least*, the lenders here took advantage of an overlooked loophole in the law that allowed them to issue loans under different terms than the well-established ones for consumer purchases -- never mind that all of the buyers were individuals signing mortgage-like loan agreements.
This isn't "capitalism." It's exploitation, and an example of predatory lending at its worst.
22
@Jeff It is the bureaucrats that created the conditions under which this occured! In what alternative universe should a taxi license be worth a $ million? We the citizens are being buried in government regulations that cause the riders to pay exorbitant rates. The taxi drivers got stuck in the middle because they were forced into making an upfront capital investment of $1,030,000 when it should have been $30,000. That over regulation is on the government, not on the banks. This is pure bureaucratic overreach. Ant the NYT wants to blame it on the banks? They didn't decide to borrow the $1,000,000. I for one will never ride in a dirty filthy taxi again in my life.....
1
@Rex Just to clarify, I'm not even remotely arguing the city and its regulators are the least bit blameless. They instigated the problem by refusing for DECADES to issue any new taxi medallions, despite the city's population growth. They compounded it by failing to regulate medallion sales on the secondary market in any way whatsoever. The Taxi & Limousine Commission clearly knew exactly what was going on, but took no corrective actions -- quite possibly because its commissioners have or had "ties" to major industry players that haven't yet been revealed publicly. Further, each of NYC's mayors have directly appointed TLC commissioners, so it's entirely possible their administrations knew about it all as well.
Yes, I completely agree the medallion bubble was patently absurd, and the notion of paying $1.3 million (their price at its peak) simply for the "privilege" of driving a taxi 12 hours a day borders on farce. And yes, NYC should've eliminated its medallion system decades ago, just like nearly every other American city that once had such systems in place (and now employ standard-issue annual permits instead). Nonetheless, a handful of credit unions & brokers were quite plainly complicit in this scheme -- as the article outlines in extraordinary detail.
The city AND the medallion lenders are the villains in this story.
@Jeff
Brokers also profited from the real estate bubble when they wrote mortgages for unemployed people with no credit history. They sold, took their commission, and walked away. The banks bundled mortgages with bad loans and sold them all over the world. The mortgages failed; small banks failed; foreclosures rolled across the depositors were left to pay higher fees, etc. This was Greenspan's version of a chicken in every pot. L.A. has empty neighborhoods, weed strewn, some people living in vans. The banks can't sell these properties, damaged and isolated.
Honestly, how is this any different than loaning money to disadvantaged college students?
- the schools say they are providing opportunity to the most vulnerable people (awesome, heroic effort)
- the students say they are reaching for the stars (awesome, heroic effort)
- the state says it would be entirely unfair to deny someone a loan because of their socioeconomic status (awesome, heroic effort)
Is anyone wrong? Is everyone wrong? Failure only happens when the borrower cannot repay the loan. If they can repay the loan, everyone wins!
At the heart of the issue is our unbridled optimism. In America, land of the brave, home of the free, making even the slightest suggestion that someone may not be capable of financial success - or repaying a loan - is taboo. So, on we go!
6
@Johnny
The student loan crisis is the result of an unholy alliance between predatory banks and unscrupulous loan officers. When I went to UC Berkeley, it didn't cost my parents $30,000 per year. We didn't have an "administrator" who did nothing, sat in an office, drew a paycheck, and never saw a student. We had counselors in Departments; they actually helped students, even if it was just to listen and offer some help and advice. What has happened in a benchmark research university is shameful. It has nothing to do with students working towards a degree. It has a lot to do with plowing everything into grad school, pushing students into community colleges, or crowded State colleges.
1
@Johnny great comment that at the heart of this is “unbridled optimism.”
" the agencies that were supposed to police the industry helped a small group of bankers and brokers to reshape it into their own moneymaking machine"
Big surprise. Would anyone actually expect anything different?
3
The core issue is the sweeheart legislation crafted to lift the lending requirements for Medallion loans and then the subsequent complete lack of oversight over those buying medallions and their funding sources. Sure the city wants to raise revenue by having sealed bids and regularly raising the minimums but you would've had natural downward pressure if no buyers or less buyers than medallions appeared because they couldn't get financing. The state and the lending industry created an asset bubble in the exact same way that the housing bubble was created.
9
The city long time ago decided to create the taxi medallions and thus created a competitive market with limited supply and ever increasing demand (until ride-sharing). What follows is the inevitable logic of market evolutions with no restrictions. In particular galling is the fact that government uses the medallions as a money maker. Policy should have been to facilitate driver owners from the start. Yet what happened are first the ascent of taxi kings and once the business started to decline the ingenious roll over to owner of the incurred debt to drivers via unregulated capital markets.
5
I can’t believe they forced these people to buy medallions! Wait, no, just like the mortgage crisis these people took own loans they could not afford on their own accord.
Have we lost any hint of personal responsibility in this country?
17
@Dr. Joe
Blame the victim; that works. The mortgage crisis was created by brokers who made bad loans to people with no jobs or credit history. Many of those who signed mortgage papers were semi-literate; they had no ability to read the fine print; the brokers were high pressure sales people working on a commission basis. Now the banks are stuck with run down properties, isolated weed strewn neighborhoods where no one wants to live, e.g. L.A. with no public transportation available to them.
This is non sense. The price went up because people were willing to pay more. Just like houses and everything. It went down because they could not sell them at the higher price. This is capitalism.
4
Nonsense. The principle of the free market is fully informed and rational buyers and sellers negotiating to a mutual agreed price for a good or service. Anytime that does not occur, the transaction is a failure and a distortion of the market. In this case the buyers were being deceived by the sellers who knew that they did not know the risks and chose to deal with them because they did not know the risks.
17
Tulips
11
Exploitation of those who wanted to work hard and better their lives but lacked knowledge of how legally corrupt life and humans can be.
20
This is white collar crime, and someone needs to be going to jail with Michael Cohen.
8
@Agilemind
Start with Wall St. and Albany pols.
Why did Trump all is this to happen?
This happened on Obama’s watch
3
@NYC Dweller
Really? Your Governor and Mayor were innocent bystanders? The pols in Albany were honest brokers? It definitely makes sense to drag Obama into the sewer of NYC and NY State politics with its long history of graft and corruption. I lived in CT for 22 yrs, and worked in NYC for 2 yrs. There were years when NYC could rival China for bribery. Remember the parking meter scandals? Obama must have been everywhere, right?
2
Wasn't this one of Michael Cohen's businesses? In any case, people who exploited vulnerable immigrants and other hardworking people should pay a steep price. Pay back what they stole. Sentenced to jail for fraud.
5
Usury is a vile practice. It is forbidden in Judaism, Christianity, Islam and any ethical life. How did it come to be that it is so common in our world today? In America in particular?
15
just ask you local banker—any banker—anywhere.
2
This is exactly what many banks did to consumers during the last Real Estate boom /bust. Banks and Wall Street conned consumers with no income/no verification “can you fog a mirror” loans. When the music stopped AIG, Countrywide, B of A and Well Fargo all got government backstopping- while the poor sap consumers got foreclosure notices. Then the hedge funds run by Wilbur Ross & Stephen Mnuchin bought the assets for pennies - making billions on the spreads.
All while millions of consumers got thrown out of their homes. Obama & Treasury Secretary Geithner worried about the moral hazards of “helping” the sappy consumers who got hosed.
12
Ah, government intervention. I can't wait for socialized medicine, ahem, "Medicare for All."
2
@jazzerooni
You don’t seem to understand the current situation. You currently have an unregulated health insurance industry that has usurped the role of doctor. Their motivation has nothing to do with medical efficacy, but rather in making sure there are no limits on charges and tight limits on payments. This also creates pressure on hospitals and practices to become latter day retail operations complete with bluster, shareholders, bank-busting development budgets and an unprecedented debt load. No other first-world country has found this sustainable. No other country that went to single payer health insurance has ever reverted to our free market model. My parents have medicare. They pay reasonable costs, have never been denied a doctor-determined care. If I max out my now-hobbled ACA plan, I will pay as much as I pay for my house in a year. Half in premiums, half in out of pocket. Meanwhile I daily drive by the office of the insurance company, whose CEO brings home in a year what it costs to run a mid-sized school district. I know gainfully employed people who are rationing heart medication and who are counting the days until they can enroll in medicare.
Sorry, but reality is often disinfectant sunlight to ideologues.
8
@jazzerooni
I have Medicare; it works for all who have it. It is efficient and decently run. It offers basic care; I could afford to add a Supplement with United Health Care; I had a fractured collar bone from a fall. I paid for one primary care visit and a sling. I know seniors who only have Medicare, and it takes care of them quite well. I also administered Benefits for a large Corp. on the East Coast; don't tell me about big insurers with a big overhead of "claims managers". Direct communication with the care givers was constrained by privacy issues. Run a national health care system for all; deduct from paychecks, SS, and pensions. Mine comes directly out of SS. I pay for my Supplement. Subsidize those with need. Eliminate the middle managers, except in optional Supplemental Plans.
2
@JP
You are absolutely correct. I know, because I was a Benefits Administrator in a multi-State corp. I had a bookcase full of State booklets issued to employees who called every day for help in interpreting the language they didn't understand. They couldn't read and understand the fine print. Those with Union reps were represented and taken care of, unless the rep was in bed with the insurer. 22 yrs. in CT, the home of big insurance companies. Finally, we outsourced the work to a professional management group; it was a huge relief.
Unconscionable profiteering and exploitation by NYC. They have lost any moral authority over outrageous drug prices, escalating rents and other abuses.
7
In the digital edition, this story was the lead story on Saturday night, all day Sunday and now into Monday morning. I could enumerate all the other stories that came to the fore in that time frame (Alabama abortion bill, Huawei, American warships sail close to China, Romney and Amash, etc), but instead I will get to the point: this story is only relevant to Manhattanites, and I doubt it is all that relevant to them, either.
You wrap yourselves in the rich garments of "America's only national newspaper." You sure ain't acting like it.
2
@Brian Prioleau
Some of us have similar Taxi industries which bubbled up and exploded. This is also a story about regulation and bureaucracy, and it is a story about disruption of industry by newer technologies. It is also a story of hopes and dreams dashed. Makes pretty good reporting for all of us to ponder.
10
Brian, you could have navigated to any section of the NYT at will. You gravitated not only to this two part expose but took your valuable time to comment. Thank you for showing it mattered.
4
@Brian Prioleau
They are in fact the “New York” times, and you can click any story you wish. The moniker of “paper of record” was given to them, it is not their motto. The fold is just a fold.
So... a liberal state run by nothing but liberals who clearly are all about the poor allowed this type of exploitation? That's weird. It's almost as if they're lying and care about money just as much as the next person/liberal...
6
@Jeif Most bankers are Republicans but nice try.
3
@Richard Sohanchyk
Bankers didn't create or maintain the medallion system. NYC government & administration-- all Democratic -- own that one. But nice try.
2
This was clearly Trump behavior before Trump. After 2008 (if not before), it was already political grand theft.
And this is how indentured servitude destroys a once thriving economy and almost instantly turns the wealthy into the unquestionable ruling class. It is also how deflation can have the same effect as hyper inflation. Eventually, when the economy fully collapses (except for the well-connected), hyper inflation takes over and only violent revolution or a responsible government can fix the mess.
Today, we are teetering on the brink. If you choose responsible government, we have a chance. If not, we have Trump full time and it really doesn't matter what parties are in power anymore.
2
the government created an artificial commodity, just like the derivatives that the investment banks did a few years ago.
This is the fault of stupid regulation. And more regulation won't help.
3
So the city actively conspires to jack up the prices of taxi medallions, and follows up by giving Uber a free pass, thereby stabbing the hardworking immigrant cabbie in the back and driving some over the edge The American dream just died in the place it was born.
10
FBI needs to investigate. The Murstein's lined the pockets of politicians to limit the supply of the medallions. How can these people live with themselves? Put them in jail!
8
A perfect example of one of the fundamental differences between Rs and Ds. Rs: “caveat emptor”...even if I con you into it, it crushes you and makes me rich. Tough love baby. Ds: “caveat emptor”, but we’ll do our best to minimize the con and equip you with the information you need to avoid the pitfalls of the con, and if you still end up crushed we’ll try to help. #WarrenHarris2020 #WarrenSpawn
5
@Mike Pod
A perfect example of liberal hypocirsy.
Big city governmental regulation creates a problem, exacerbates it, profits from it- and then because, in your universe, they say "oops", makes them morally superior?
THEY CREATED THIS DISASTER!!
1
More tales from the crypt. God bless the criminal state.
1
Bankers evil.
Government no fault.
Uber bad.
Market unfair.
Taxi drivers good.
Signed,
NYT
2
@Avi
Do you bother to read a piece before commenting on it? The piece is specifically calling out numerous government agencies.
1
Discrimination, overcharging, needless detours, and fisticuffs on the streets. These were the conditions trying to hail a yellow cab back in the day before Uber and Lyft. Drivers would yell through half opened passenger windows, "I don't go to Queens!". Never mind that I was in midtown trying to get downtown with 2 young daughters and packages with me. People forget that many meters were rigged to make your fare run faster. One day my charge from X to Z was $20, the next $25, both under the same conditions. But, you were held captive and had to pay because the driver locked all the doors. The quickest way to your destination? He never heard of it. A rainy day? The fastest person to sprint to his cab got the ride. Funny the way peak ride demand happened when cabs were going back to their garages. I'll let you decide whether a bad service model led to the rise of an alternative and if you the consumer has benefited.
18
@Elaine
Misses the whole point of the article, and without a credit card synced with a smart phone, Uber ain’t taking you anywhere.
1
I completely agree with you. Thank God for UBER & LYFT
2
In this instance, these people are not too big to fail. Who will protect them?
2
Thank you NYT for bringing this scandal not only to your city's attention, but to the rest of the nation and even the world. It's journalism like this that exposes the muck and, hopefully, leads to change.
5
@Connor
When I first learned of the prices for being a taxi driver in NY, more than ten years ago, I shook my head at the insanity. And NY and NYers allowed it!
2
Rapacious capitalism everywhere , healthcare , education , banking etc , and now even hitting hard working taxi drivers .
What a social disaster !
3
Collecting the money and knowing there is a deceit going on is a typical GOP tactic . Very sad. Lock the money counters up.
1
The type of reporting that we should see more often esp with larger banks , regulatory inefficiencies, closely affiliated individuals, taxes and "legal arbitrage"
Good work NYT but where were you when this was happening?
3
These taxi drivers could have worked out of a base as livery cab drivers and still make a decent living. I think the government agencies that totally allowed cabbies to be financially ruined did so because almost all these people are immigrants. The immigrants should have asked themselves if this is such a great opportunity how come it's mostly immigrants taking the risks and not native-born Americans?
5
In the scramble to make money, making money from money itself (which is called usury) is without a doubt the least beneficial activity in a full social/economics analysis. Put another way: usury is the scourge of capitalism. It takes no brains to lend money.
But does it work? No, not if you look at the whole picture. The degree to which it does not work well for the society allowing it is directly related to the interest rates lenders apply. And suckers accept.
3
What should embarrass and shame most Americans is what is legal.
The federal income tax code is corrupt cowardly crony capitalist corporate plutocrat oligarch welfare license to steal. The code provides deductions, credits, subsidies and lower tax rates.
But only for certain industries, persons, transactions, sources of income, business entity structures, contracts and securities favored by those who have lobbyists buying legislative, executive and judicial compliance, conspiracy, cooperation and coordination.
Private industries are ' regulated' on behalf of maximizing the profitable advantage of their shareholders aka owners. The taxi ' industry' is particularly and peculiarly susceptible to the organized crime model in the gambling, longshoremen and trucking ' industries.' From Lyft to Uber you have the new gilded age robber baron malefactors of great wealth.
4
Wait, who can save the day? Why it must be the loveable cuddly Democrats!
Ooops, arent they the ones the created the system that drove up Medallion prices? Dont they have pretty much a lock on NYC politics since forever?
Wait, I am confused. My narrative is crumbling. Does not compute. Does not compute. Sensory overload. I am programmed by the media that Democratic leaders love and care for everyone. How could this have happened.
Oh, maybe Democrats are just as corrupt as the conservatives!
10
@MM Um, Giuliani is a Republican. Bloomberg initially won as a Republican. But why would a Republican care about facts when you're trying to make a point?
2
@MM Democrats like Giuliani? Or maybe those democratic bankers? Or maybe Michael Cohen? This is about people’s lives. How despicable to turn it into a personal cudgel for partisan bias. For the record nobody and nothing is as corrupt as the “conservatives”.
2
caveat emptor
NOT UBER/LYFTs fault! AND cabbies had a monopolistic control over riders! So happy for UBER/LFYT, come quicker and cheaper with "..its faster around the park scams..."
4
When I got involved in representing lenders on medallion loans about four years ago, I immediately saw that the business looked like subprime lending: The borrowers were using cash from refinancing medallions for personal purposes like home improvements and college tuition. The loans were originated by brokers who had an incentive to put borrowers into the most expensive loans possible, and the borrowers often did not understand the obligations they had taken on. What's more shocking is the revelation that the Taxi and Limousine Commission knew of these problems and turned a blind eye because the City was dependent on revenue from medallion auctions. Kudos to the Times for a well-reported series.
7
Once more, “trusting the markets” led to bad results. Regulation and oversight failed.
If you applied deregulation to armed robbery, would anyone be surprised if holding up people at gunpoint turned into a growth industry? That’s what happened here.
They say power corrupts, and absolute power corrupts absolutely. In America today money is power.
2
Just how much money does a taxi driver/owner-operator make, where he can justify spending $600,000-$800,000-$1,000,000 plus on the "medallion"? I'm going to go out on a limb and say that this taxi industry, all versions from City hall, to unions (are taxis union?), to the appointed overseers, are also completely against UBER and LYFT, because they offer a cheaper alternative. Just like New York City and also Chicago politics, nothing I've seen, has convinced me that they aren't completely corrupt, Top to Bottom.
3
Great investigative reporting by "the enemy of the people."
One could argue that the drivers bear some responsibility here for not being sufficiently financially savvy, but the whole lending industry here seems to border on the criminal. It certainly seems to merit investigation by the DA or AG.
6
I remember studying taxi medallions in economics 101. The medellians were introduced to restrict supply so cab drivers could make a living. But government allowed medallions to changes hands freely. As they generated extra profit they had value. it's price should be capitalized extra profit over what profits would be earned if there was no medallions. As government did not increase number of medallions despite rising demand than value increased.
The government was paralyzed. Taxi driver were not earning good money because they were paying off medellian but the government could not issue much more medellians (or stop the system) because it would ruin those who bought them in the past.
5
we all complain that Republicans are for the rich and Democrats are different. Well, here is a democrat-run city and state, and we see the same brutal economic exploitations. we should not be surprised then that Trump is president. that's what we deserve now, until there are real alternatives.
16
@sally B. It is a weak, cowardly concept -- to select a lot of bad form in order to avoid some bad form.
1
@sally B. There are real alternatives you just have to have the courage to vote for them.
1
Perhaps the drivers themselves are at fault. They invested in a medallion at the top of the market with the believe that the medallion price would continue to go up. Its the oldest story in the world. Moreover, do you expect the bankers and lenders to lend money without making profit? As sad as this story is I'm sorry but I am not crying tears over this one.
4
Nobody's asking for your tears.
The big issue here is well-informed and conniving bankers preying on vulnerable targets.
But in 'Merica we blame the victim and champion theft and scams and "profit" over honest work.
5
"A banker is the type of man who will lend an umbrella on a spotless day in July." -Mark Twain
11
Amazing investigative reporting.
7
I note that Michael Cohen's name is on the front page, and that, when Cohen thought about cooperating with the Mueller investigation, Trump threatened that "investigators'" should look into Cohen's family's business. This implies a knowledge by Trump of this medallion cartel.
11
Sounds very much like the ridiculous student loan scam. Taking advantage of an 18 year old and exploiting her dream of being successful by loaning hundreds of thousand of dollars that are nearly impossible to pay back.
20
@RP
And the mortgage industry, payday loans industry, private education, environmental impact....etc.
Without regulations, greed and corruption are given free hand and the "red tape" one says they are clearing up is replaced by even more "red tape" as people's lives are destroyed, economies fail and even the planet suffers.
5
@RP When such loan-sharking gets out of hand, the systemshould just nullify the loans altogether. Nothing will stop loan sharks faster than the realization that they could be the real losers.
Regarding student loans: regulate them better. It will change higher education very quickly. Almost every university is extremely top-heavy with unnecessary administrators as well s over-paid faculty.
I know, because I was one. The American pay scale is out of focus (and not just in academia).
5
@RP Unfortunately, we're not raising kids with any amount of sense. Some things should be obvious. Like... getting a business degree or an art degree is a waste. But.. hey, the government should pay for such useless things, right?
State and local government officials who let this travesty happen, have blood on their hands.
This is corruption plain and simple.
Organized crime by any other name.
The feds should investigate and bring these criminal bankers and their government henchmen to justice.
13
People complain about Republicans, but New York City Democrats are just as bad. Although I miss the restaurants in New York, I certainly do not miss the corruption, which seems to be a constant. Blood on their hands in this case.
10
Are banks, savings and loan companies run by Democrats? I don’t think so. Every financial scandal seems to emanate from Republican circles. Deutsche Bank, Capitol One, Wells Fargo. Can we please get a handle on our finances?
8
@David J No but the T&LC is as well as the City Council. Just like Republicans created and cultivated the environment for the housing crisis, NYC Democrats do have some blame in this story.
2
In 1995, a college friend asked me if I could help him and two other Binghamton students secure a loan to start a magazine to compete with Vibe Magazine. These guys minimized expenses and were vertically integrated (used head guy's basement as headquarters) Their biggest expense were printing and distribution. Then came the internet. Caveat emptor!
5
For all of you who worship at the alter of more government, this should be another example of why one has to be very careful when the government is involved.
7
@Robert
Maybe. But I am not a libertarian enough to say no regulation is good. This is a real valid story about removing many regulations and the arbitrage of law between agencies by the crony capitalists to "keep the lady dancing." at out expense.
3
@Robert
Oh good lord, this is not an example of excessive government; it is a failure of government to do its job. Do you want to start drinking tap water and riding elevators that are not inspected?
10
@Robert
How do you like the idea of mining interests and oil drilling in National Parks? Trump et al are gutting the EPA and installing Agency Heads whose aim is to destroy the Agency once installed. We can go back to the days when the Hudson River was a sink of pollution, or the air in L.A. was literally a killer. Perhaps you would like to remove the regs which require scrubbers in industrial smokestacks which used to belch out Mercury and other toxins. Children on the East Coast were in the path of Mid-West emissions; asthma crippled those kids before regs were legislated. Who cares about kids until you need them to fund your SS and Medicare. Do some research on what is known as The Social Contract, the foundation of any civilized society. If you don't want to pay in or have regulations, move to Somalia or Nigeria, then get back to us.
Perhaps the Uber offer to provide a car and a steady stream of riders is a better deal.
3
@David Anderson
uber does not provide cars to drivers
1
@David Anderson
Perhaps you have not heard of those Uber drivers who lease cars but because of fellow competition can't make enough money to pay their monthly costs.
2
These loans should be forgiven and the banks made to eat them. They knew how to do simple math and knew the chaos that was coming. The immigrant cab drivers were blinded by their dreams and men in suits who told them the loans could be paid back. They cannot and our society should protect poor people from predators.
16
@Pablo
I bought a tremendous house. Business has not been so great for me. I spent my savings to pay my mortgage.
Who do you expect should kick in their savings to bail me out?
5
@Pablo Well maybe I don't understand the terms of these loans (I haven't read the entire article), but they should just surrender the Medallion to the bank and walk away. Surely they're non-recourse loans? I mean that won't exactly help the overall value of medallions in the market, but it seems like a reasonable out.
1
@Ny Surgeon
If you made it through Medical School, your anecdote doesn't add up, unless you bought a license to practice in the Caribbean. You bought a house with a mortgage you couldn't pay through an economic downturn? I would not seek out your surgical skill set.
We have a top NYC elected official who is responsible for fighting exactly this sort of problem: The Comptroller. A bunch of taxi Commissioners should be held responsible as well, but if we really wanted our elected officials to live up to their titles, the Comptroller should be forced to resign.
6
@Brooklynland
Forced to resign his only punishment? Confiscate all his assets! And the assets of every single other 'regulator' that 'failed' to do their job - 'failed' = participated in corruption/evil.
Redistribute them to taxi drivers.
Did these taxicab drivers believe the medallion was $50,000 or that was just the downpayment? If so, while it might be too late to say shoulda coulda, but perhaps they needed to consult a lawyer? Surely, they know a medallion was more costlier than 50K and needed to figure out the total cost of ownership. If you buy a home, you work through a lawyer even if there is a real estate broker, no?
The above sounds heartless because these were obviously shady if not out there fraudulent but it is almost like those online relationship scams, they prey on people's weakness, be it greed or loneliness, but you have to wonder if preventative education is far better than buyer's remorse, no matter how shady
1
@Bos
No. Regular people don’t hire lawyers to buy a house.
@Older Than I Realize
Dacades ago, I almost bought 1/2 of a duplex but the lawyer took one look at the incorporation paper and told me to back out because the lawyer who did the incorporation messed up. He divided the share by percentage. My half was 49%... And you know what that mean, that half has no say
Please "Older," do yourself a favor, if you are making a large purchase, like a 30 year commitment, check with a lawyer so you won't have buyer remorse
1
@Older Than I Realize
sure they do
This is the real SWAMP...predatory banking loan activity supported by government agencies that turn a blind's eye to a financial crisis in the making.
TARP was a government bailout for banks that did exactly what happened here. They swindled uninformed people by dangling the blinding light of fake opportunity with a zero money down loan, coupled with a lot of sweet talk from swindling loan officers about the American Dream.
This is not capitalism and it's certainly is not good governance.
Government is supposed to protect people, not join the mobster banks to shakedown ordinary people.
What is most sad about this situation, Bloomberg, Giuliani and De Blasio are sophisticated enough in business to know exactly what was going on at the time yet turned away from doing anything about it.
Deadbeat government must go...
6
Once again, banks exploit, government turns its head or does nothing, the exploited go bankrupt, everyone else skates free. What a country.
4
Everyone from the bottom to the top, from the taxi drivers, the banks, the city officials - was motivated by money. Everybody thought they were smart and going to beat the system. Oooops. Reality strikes again. It's just human nature folks. It goes on everyday, everywhere you look. It's all over the pharmaceutical industry, the defense industry, the real estate industry. It's all over our government - state, federal or municipal - and it's destroying the planet in the process. Everyone needs to have "more".
6
@Weary Taxpayer The city was motivated by the hatred of mans independent mind. Thus legally-required medallions.
The practices of these officials are beyond shameful. Please send in the FBI for an investigation.
5
I blame the city. Their greed in imposing a such a high fee to operate caused this crisis.
3
Your report demonstrates yet again that capitalism and capitalists often are very unfare.
4
The federal agency that oversaw many of the largest lenders in the industry, the National Credit Union Administration, said those lenders were meeting the needs of borrowers.
________________
Huh?
1
“Creative destruction” “Disruptive capitalism” We as a society should choose to step in and help, even when the situation is such a warped market.
Same debt traps have snared with low income students and farmers, while the banksters cash in). If taxi drivers (farmers) want to keep their business, they have to accrue mandatory debt. If students want an education they have to accrue mandatory debt. In both cases the debtors have to agree to draconian terms. Then corrupt government official run for cover when the bubble bursts; and they even bail out the banksters, leaving the powerless to suffer and the public in debt. The root of the problem is government corruption and greed. Start with campaign finance reform to limit "campaign contributions" (i.e. bribes) by the banksters.
7
Who would City officials and the taxi industry blame if Uber had not come on the scene?
2
Great investigative reporting. This is why I subscribe to the Times.
3
You mean you can’t pay back a $700,000 loan driving a cab? Who knew.
17
I'm sure the mayor will try to take someone else's money and try to bail them out.
3
A crisis entirely manufactured by the City of New York. First they restrict the market by limiting medallions. Then they allow the medallions to be bought and sold. Then they allow individual and corporations to amass these licenses. Then they further restrict the market by sharply limiting alternatives. And if all that weren't enough, the city profits off drivers' misery, aids and abets corruption, and when caught keeps right on keeping on.
Solution: start issuing non-transferrable individual medallions to drivers (not to cabs) at nominal cost, diluting the overall medallion market by at least 5% annually. In 10 years we'll have a system that is still rigged, but at least semi-rational.
7
A combination of poor civic management by NYC officials and the ravaging effects of disruption by UBER and LYFT.
With all the billions the two ride share programs have made, it would be a gesture of good faith for them to relieve some of this very real world suffering.
6
@Dileep Gangolli so every new industry has to pay off the old inefficient industry they replace. The banks and the government who created this scenario are not to blame. Just raid the pockets of Uber and Lyft. Really? Really?!
6
It should not require too much investigative skill to figure out who knew how much about the ride-hailing services that were building their own revenue streams, and when they knew. It's a short step from there to the collapse of the medallion market.
The question for city, state, and federal investigators will be how much to they want to know. Perhaps they should follow the money?
6
Usury: the practice of lending money at unreasonably high rates of interest.
There is a reason that usury is forbidden in many religious and ethical traditions: because it rips society apart. It is not good for families or communities. It only benefits the money lender and any official who is in their pocket. And usury is widespread and largely unchecked in American life today. Time to elect Elizabeth Warren or Bernie Sanders and pull the brakes on this runaway train.
21
@Judith
Sadly, America has lost it's moral and ethical edge.
3
@CHP Morality is a guide to life, not to a cross and nails.
Seems to me that 5 minutes of basic math on a napkin would tell you that taxi medallions at those inflated prices were a bad deal. This sure looks like a NYC-sponsored ponzi scheme and the Taxi commission should be held liable.
53
@John--Apparently, the bankers that loaned the money didn't bother doing basic math either. A person making only $40,000 can't get a real estate loan for $1 million. Why were these taxi owners able to?
11
@Ms. Pea Why did the taxi owners sign on the dotted line?
6
@John. True. But unfortunately, this is characteristic of a bubble, where buyers assume the value will always go up, and they can always sell out.
It's a classic positive feedback loop, wherein as prices rise people are more motivated, not less, to try to buy in. They think they will miss the boat.
But the boat sinks, right after they get on. Common sense is not terribly common. In this case, most of the victims are recent arrivals to the country; easy prey. And yes, the referees on the field that allowed this to go on should be held responsible.
Mr. Ghobrayal could have lived for the rest of his life in an upstate New York town & opened a small business or created a mini-farm. What was he thinking? $890,000? How does an immigrant generate that kind of borrowing power? Little wonder hostility exists in some quarters.
8
Thank you New York Times for exposing this story. This is exactly why we need a strong and independent press.
68
Any other business license costs a few hundred dollars in New York City. Why are taxi owners discriminated against in this way? Operating a taxi should be treated like any other business in the city. No one would open any business if a business license cost $1 million. That's outrageous.
18
@Ms. Pea
The Times article omitted to tell of the origin of taxi regulation. In the 1920’s the industry was dominated by organized crime & provided cover for your local bookie. It was the gambling monsters and loan sharks that transmogrified into the lenders described in the article. These same people spawned another way to scam the drivers thru a mutual auto insurance company, now bankrupt and long departed, leaving the State to pick up their obligations.
4
Exploitation is often cloaked under a ruse known as "market rates."
14
And I assume you believe that the individuals who bought these medallions at such high prices are completely innocent? come on now this was pure speculation and if these individuals did some simple arithmetic they would have realized that the loans could not be paid. All are to blame, especially the driver/owners
12
This story is simply heartbreaking. I am left speechless with the degree of depravity.
I love New York dearly, but would NEVER vote any local or state officials for federal office. The corruption runs so wide and so deep.
19
Is there a fund I can donate to to help some of these drivers who are in financial destitution?
9
I first drove a taxi in 1980. In those days, white cabdrivers were common. It was a very hard way to make a living and most of us felt exploited but no one was going bankrupt. A medallion cost 60,000 dollars. The industry changed quite a bit in the 80s. The big taxi companies introduced taxi leasing and many dirvers, working insane hours made really good money especially since 80 percent of it was tax free. For a couple of generations immigrants with enormous hard work on their parts became millionaires building small taxi businesses and then investing their profits into real estate and other small businesses.
The price of medallions kept rising and in the 2000s as the article notes it rose to a million dollars. Drivers who owned medallions could sell them out right or give them to a taxi broker who would return 15 to 20 percent on the value of their medallions. With six medallions one could retire anywhere in the world and live like a king.
Of course, capitalism does interfere with ones plans. The robber barons took control of the industry and made it virtually impossible to make a living if you lived in New York City, housing becoming unaffordable.
The coup de grace has been the obsolescence of the medallion system with the invention of the modern ride share system. The taxi industry has been under assault from a nonmedallion rider system that offers far better service and cheaper prices. Drivers though, taxi or rideshare suffer greatly. They are mere tools.
18
When Taxi medallions headed for 1 million it was like the tulip craze, or the run up to 2008 in real estate keep watching the numbers folks!
It feels like 2007 all over again.
8
Breathtaking in scope and audacity. Not the "crime" but rather this penetrating investigation by The Times. This story is right up there with the George Bell saga as a read that nudges me towards a more nuanced understanding of humanity vis-a-vis New York City.
Me votes a Pulitzer for Mr. Rosenthal.
14
One thing stood out to me, folks that see dollar signs, emptied their bank accounts, borrowed money from friends and relatives. Then handed over a check for 50k, then signed their name. All without reading what they were signing.
This person broke every rule of financial responsibility.
One always reads the paperwork BEFORE handing over a check. This person and many others were willing patsy's. One should always know what they are signing off to.
If the lender or whoever will not let you look at the paperwork, then the deal is no good.
Now I do think this very unfortunate, and this person was taken advantage of. However, he certainly bears some responsibility for this dilemma. As the woman from the TLC said, "everyone just watched", although they all knew that it was wrong.
If the taxi drivers walked from a deal was too good to be true, then things would change.
I see both sides as culpable in this situation.
The solution will be complicated to resolve, and I don't offer any, but it must start with folks who are willing to walk away instead of being naive.
9
@Upstate NY DId you read yesterday's article? The folks who mortgaged their futures, along with their family and friends were largely recent immigrants. Many do not have strong English or financial literacy skills. They were like lambs at the slaughter.
6
This has been a known racket for decades and the gouging price for medallions was common knowledge but somehow given a pass as some way of regulating the number of taxis in the city. The unspoken nail in the coffin was Uber, as that flooded the streets with cheap rides and ended taxi driving as a way to make a living. Uber now is the skimming business. Not a big debt up front, but still putting a burden on drivers while taking their percentage as the keeper of the app.
7
It's the taxi drivers who behaved recklessly. They drove up the price and then faced the consequences when it collapsed. This is the story of entrepreneurship. Risks are inherent in all business startups.
Not unlike the way college costs have been inflated, except in that case the government played a large role in driving the costs up with easy money.
14
@AACNY: Sure, sure! It’s all the fault of those greedy drivers! Just like the cause of the last recession was those greedy homeowners ( certainly NOT AIG, Goldman or any of the other Big Short actors ) Did you even read this article Mr. Bloomberg?
3
Typical of our political class. The world changes. New technology comes along. A new product or services is cheaper and more effective.
The government cannot and should not try to control those changes but they should not actively seek to make things worse by undermining workers in the existing industries.
Here NYC officials inflated costs while revenues were declining for their own benefit. Abject corruption and self dealing for which they will not likely face consequences.
Nationally, over the same time, we have seen our elected representatives cut trade deals and import cheap labor that denigrated manufacturing, trade jobs while they went off to Davos.
To the immigrants hurt by these policies, welcome to the working class where the same politicians who cater to you when its time to vote will throw you under for their own gain.
6
I believe in the c.e.n.t.s. business principle. When starting a business ask yourself 6 questions.
1. C- How much Control do you have of your expenses (vertically integrated)?
2. E- What are the barriers to Entry?
3. N- Is their a Need (demand) for your offering?
4. T- Can you bring your offering to market when in demand in Time?
5. S- Is your offering Scalable (processes can be easily duplicated)
6. Can you live with the worst cast scenario if things don't go as planned?
8
Did I miss something? Why was there no culpability for those that borrowed money and did not pay it back? First college students, now taxi drivers. Doesn’t anyone honor the commitments they make?
You present these medallion winners as victims but nobody forced them into bidding.
29
@Matt Williams
The bankruptcy laws of the mid-2000s prohibit bankruptcy for many, many individuals, including college students. Lack of control of the prices, optimism about the future, and a basic lack of economic knowledge caused many of these loans. It's cruel to look at the victims alone, since they have no way to remedy their mistakes.
3
@PJW
"The bankruptcy laws of the mid-2000s prohibit bankruptcy for many, many individuals, including college students."
Absolutely untrue. Anybody can file bankruptcy. PJW may be misunderstanding the fact that in bankruptcy, student loans are extremely difficult to discharge.
1
As a matter of course , students loans are NOT discharged in Chp 7 bankruptcy.
1
If you believe Uber to be a taxi service - which of course it is - then the fault of the medallion collapse lies squarely at the feet of the city and it's failure to enforce the law. The law being that one needs to be licensed to drive a cab. If you want an example of a city that acted properly, look at the example of London, where the city treated the law as it it meant something. To blame the financiers in NYC for the collapse of medallion requires one to simply ignore the facts above. Or to think that Uber is not a taxi services lol.
24
@Joe Bao
"The law" you would like enforced is just a set of rigged rules that benefited rent-seekers, until Uber came along. Uber has more than doubled the number of trips in the City. The medallion system was rigged by the taxi industry to artificially decrease supply--to the detriment of the riding public and the advantage of fleet owners (drivers, btw, have always been fleeced).
3
@Joe Bao
Did you read and understand the entire article?
If a credit union lends money that cannot be paid back, then it will be a big loser in this picture. This isn’t addressed in the article. There is one note on Federal guarantees for parts of these loans. What’s that all about and how did it come to pass?
7
And if HBO made a series about this called "Taxi Empire," depicting these same cut throat events, it would score high ratings.
We really need to decide whether this kind of stuff disgusts or tickles us.
You cannot digest a steady diet of violent and cruel culture and expect things to be all roses and morning dew in the aftermath.
22
I would have though that New Yorkers were the people most likely in the world to know a bubble when they saw it - but then again making a fortune from a bubble is also something that can be learned.
5
This represents an aspect of a larger phenomenon: the conversion of tools of production into financial vehicles.
Other examples include real estate in major cities (money havens), precious metals (via exchange-traded funds) and access to Ivy League college degrees (vanity ornaments for wealthy parents). In each case, it displaces those who would put the asset to its highest and best purpose—workers in major cities, electronics manufacturers, future professionals—from being able to access the asset.
We all pay when this happens.
Government intervention is necessary to ensure rational market operation. Vancouver, BC, for example, began a two-tiered tax system to penalize real estate owners who did not occupy or rent their properties.
49
@David Fergenson
Here in the Bay Area, we absolutely need to penalize owners who don't rent or occupy their properties!!
Welcome, immigrants, to the Unites States of Corporate America, where bankers and billionaires are above the law.
Even if you work very, very hard here, you may remain poor, undervalued, and even deported.
53
@Hmmm Give the narrative push a rest. You also have to make smart decisions in the U.S. Paying $890,000 for a taxi medallion is not a smart decision. I know the far left likes to push the victim narrative where no one is responsible for their own decisions but the taxi medallions were in a bubble phase. I would never have taken on a huge loan to do that. Sorry, it was his fault. You know what smarter immigrants do? Many go work for the post office and get full benefits. Or they work for the NYPD issuing parking tickets and get full benefits.
The endless pity parade from the far left will drive this country into the ground. Whenever a business proposition seems too good to be true or a "sure thing" it probably isnt. The taxi medallion market was too good to be true. Either we have personal responsibility or we dont. Apparently, the far left thinks everyone is being taken advantage of when they are just making very bad decisions.
16
@MM Yeah, maybe us working people can fund another round of tax cuts for you and your rich banker friends. I'm amazed at reader's failure to comprehend what they're reading in these posts. Mayor (government) needed to fill a gap in the city budget (loss of tax revenue) so they sold medallions at bidding wars (artificially created demand this over valued) and ignored warnings from agencies that this was dangerous practice (Republicans repeal of regulations/regulatory agencies) so that middle and low income people could bare the burden of the tax cuts through higher cab fares and medallion purchases. Wake up! Get out of your political world and think people. The banks got bailed out in 08 and we all paid for it. The bailout money could have gone to "underwater" homeowners to shore up the loans, save their homes and the banks would have been paid up to date but no the rich bankers got paid in full for loans they knew were risky (credit default notes AIG?) people lost everything and the banks took the houses and resold them making an extra profit.
7
@MM "The left"? What about plain humanity, looking at how economically ignorant strivers were robbed by the government that was supposed to oversee the market (which they had reason to trust), and the greedy and sometimes criminal medallion cartel?
2
How about talking about the Banks who lent to Medallion Funding.
12
There is absolutely no reason why New York City should not have issued as many medallions as people wanted over the years. The medallions aftermarket value would've been worthless so the drivers would not have needed to pay anything off and taken home more, and there would also have been more taxis on the streets. This is not a failure of the free market, but a failure of the government not letting the free market work, allowing middlemen and market manipulators to strike rich and prey upon the unsophisticated or the unsuspecting.
47
@RSSF
Thank you for this observation. The NYC government created an artificial monopoly for decades (penalizing taxi riders) and then Uber came along and circumvented it, bursting the bubble.
Small medallion owners were crushed, and —contrary to the thrust of the article—lenders lost a lot of money. But the real villain here is the local government which first created a problem and then mismanaged the problem they created.
16
@RSSF
Exactly right!
1
Economists have known for generations about the enforced oligopoly of New Your City tax medallions. By restricting supply and exacting rents, the city could keep fares much higher than natural, enriching cab companies and drivers at a cost to passengers. The exploitation that followed was predictable. But when Uber and Lyft destroyed the business model, the independent drivers who had paid the exorbitant prices got stuck with the debt. The problem is a direct result of needless restriction through licensing, which is justified only for safety.
15
@Dennis Nichols
The NYC Taxi industry had what can only be described as a business model designed for failure.
No leg room in the back seats, annoying videos, cabs that all went off duty at the same time in the afternoon, drivers who were often rude or unhelpful.
That's what opened the door to the ride hailing companies, demand for quality service.
16
@brooklyn
Yes I remember how impossible it was to get a car downtown on a weekend night. In the outer boroughs? Fuggedaboudit.
3
@Andrew
Yes, and even now, with stiff competition, the yellow cab industry does nothing to market itself. How about competing with Uber, et al, on their own terms, with dispatchers who can find and assign the nearest cabs?
1
Lender liability was a legal doctrine used during the farm crisis of the 80's to eliminate or write down some loans. Does that theory still exist? Most lenders no longer make asset based loans.
1
@Dirt Farmer
Huh? Most loans made are asset based loans.
4
“Asset based” by industry definition is different that collateralized cash flow lending ( mortgages and car loans etc )
In many cases medallion owners dug their own graves by continually refinancing their medallions in order to pull equity out of their appreciated asset to buy homes, pay for education, (not bad things), buy more medallions,(possibly bad), and to lavish luxuries on themselves instead of just paying off the medallions, (extravagant), instead of making their money without the burden of paying off their medallions.
If I owned a medallion on which I owed a ton of money I would take advantage of the Bankruptcy laws and go Chapter 7. If I wanted to stay in the business I'd buy another medallion for a very discounted price, maybe $185,000, and I'd make an OK living.
The further fact is that what killed the yellow taxi industry IS Uber and Lyft. Before Uber and Lyft if you needed a ride you'd hail a yellow, which I still do, or take a black car which is expensive.
5hat said, time marches on and frequently new industries supplant older industries. When's the last time you bought a cassette or used a pay phone?
17
He [Mayor Bloomberg] had a $3.8 billion hole in his budget.
One big reason there was a hole in the budget (and that the current mayor has continued to sell Medallions) is that the city is home to large numbers of poorly educated illegal migrants who need lots of government services, but contribute relatively little in taxes.
While it may sound merciful to welcome and provide services for illegal migrants, it is not sustainable unless politicians resort to schemes like selling over valued medallions.
22
@ann: "One big reason there was a hole in the budget (and that the current mayor has continued to sell Medallions) is that the city is home to large numbers of poorly educated illegal migrants who need lots of government services, but contribute relatively little in taxes".
Why are you blaming hard working illegal immigrants, when the blame should be put on the rich White corporate bankers and wall street people who rip these people off.
3
Once more, for those in the back who apparently cannot hear...
Illegal Immigrants Do NOT Receive Welfare
‘Government assistance’ = ‘welfare’ = you need a valid SSN = you are NOT an illegal immigrant.
Le sigh.
2
Right on!!
1
Can NYC's Department of Justice or our Attorney General get involved in this case?
8
NY, NY the town so nice...they robbed it twice.Trump financial ethics at work. As in none.
6
@Harley Leiber
As the article makes clear, if these are Trump's financial ethics, they are shared by de Blasio, Giuliani, and Bloomberg, not to mention the entire oligopoly known as the City Council.
what a surprise! USA is known to rip off immigrants who are willing to be self-sufficient, while loves welfare kings/queens.
15
A classic scam:
A poor cab driver wants to make his American dream come true, but he is ignorant of laws and the ways of the business and the system. He is taken advantage of (robbed) by the crooks who didn't care about the driver's ability to pay the loan back as long as they can loot the immigrant at every step. The artificially inflated price of the medallion was the hook.
Moral of the story: No one cares about poor, immigrants and native born. The country is (mostly) run by crooks. Sadly, it's not a recent phenomenon.
52
I'm stunned at the number of comments on this and the prior story that are blaming "the capitalists", "the marketplace", or "the greedy rich" (or similar phrases). The free market and capitalism didn't create this system. Government bureaucracy created and maintained it by artificially limiting the number of market participants. If you want to blame someone, blame NYC government for constricting the number of medallions for decades. That artificially inflated the value of the medallions and let rent-seeking interests take advantage of the government-created economy. If NYC had issued as many medallions as requested (assuming compliance with safety and background inspections), you would've avoided this situation. This isn't a failure of the free market. This is a prime example of how government manipulation of the market leads to absurd results.
116
@James Maybe the 'government' needs to publicly fund better mass transit systems, which would make the city even more competitive? As for the medallion system, it was obviously turned into a pyramid type scheme. Should I ask for a list of who the lenders are? I'm pretty certain the list would contain more private actors than public ones.
5
@James
You’re exactly right, although I would bet that there were arguments made at the time that this was about making cab driving an economically viable job by preventing the market from being flooded with cabs and making it impossible for drivers to make enough money.
Whether those were specious arguments used to just inflate cab company income or not is probably an exercise for historians.
2
I thought that the restriction on the number of medallion sold was to protect the drivers from too much competition and self cannibalization where there would be so many drivers that the prices would fall to an unsustainable level or there would be too many empty cabs. Isn’t that where Uber and Lyft are heading?
Granted, the prices for medallions did get way out of hand and there were not enough issue to keep up with population. But as an idea I think it’s well-founded.
1
Taxi. Ponzi scheme, banks win, everyone else loses. i don't know the fix, unless you say medallion owners were duped, which is perhaps true, but I'm paying that freight. However, Technology killed the cab business, Uber, Lyft, etc. Its the same for many industries where technology wins!
Sorry guys???
1
From Wikipedia:
Musical chairs is a game of elimination involving players, chairs, and music, with one fewer chair than players. When the music stops whichever player fails to sit on a chair is eliminated, with a chair then being removed and the process repeated until only one player remains.
2
It is really heart breaking. No words to describe. How the system sucks immigrants' blood and sweat. Their blood savings wiped out and ending up in debt and abuses from brokers. Pathetic!
17
So if I buy a medallion for over $800,000, and I don't think the interest rates were mentioned and exactly what the monthly payments were.
Can somebody tell me just what my earnings would have to be to be able to afford this loan?
And do taxi drivers really make that much?
16
I guess it is like the subprime crisis. You buy something in the assumption you don't really have to pay it back because the price is always going up and in the end when you sell it you will make a profit.
6
So did no banker do a simple discounted cash flow analysis? If the cost of the income producing asset increases 5 fold and the cost of funding stays the same then the flows on the income side have to catch up. Discounting the flows should give you the price of the asset. Given that the income flows doubled at best this was very poor analysis. Or just more bubblenomics which relies on cheap money financing the banks.
1
Summary, the poor immigrants who bought these medallions were set up for a rip off. All under two republican majors who failed the city miserably. The worst, Bill Diblasio who was supposed to be different.
8
de Blasio is a Democrat
Very interesting and timely articles! One question that the author or a colleague at the Times may be able to answer: How many of the defaulted loan are for medallions bought directly from the City, and how many are for loans made for medallion purchased off prior owners? As detailed as the articles are, that remains a bit unclear. Thanks!
24
The medallion bubble, subprime mortgage crisis and student loan crisis are all the result of government trying to interfere with the market. The market is not perfect and definitely needs regulation but Dems' style of dictating results is going to have consequences.
12
@AmateurHistorian It seems your thinking is stuck back in Economics 101 of “assume a perfect self-regulating market.” It would be really nice if markets regulated themselves but they don’t and never have. The lack of enforced regulation and true oversight is exactly what caused the corruption and greed here, in the same way it did in the banking industry with the mortgage crisis and in the hazardous waste disposal industry prior to regulations in the 70s and 80s. Without regulations and consistent enforcement, businesses will always do what is cheapest and most lucrative for themselves irrespective of ethics and consequences to others.
9
To Those who believe the free market would have averted abusive lending practices: what are you smoking?
7
One of the interesting things about this article is NYC is a Democratically controlled from top to bottom. These huge profits generated for bankers, brokers, lawyers, investors, fleet owners, debt collectors happened in plain sight of every Democratic leader who had the authority to stop it. Where were they? Or did they decide to look the other way because of the massive campaign contributions that were filling their coffers. I would like to see a list of the NYC politicians who benefited and profited from this catastrophe. Name some names.Then I would like to see the NYT hold their feet to the fire. Someone has to answer for this. I don't expect bankers, brokers, & lawyers to always be ethical when large sums of cash are involved. But I do expect our civil servants to make sure they don't egregiously step over the line. In this instance they were criminally asleep at the wheel. Why am I not surprised. Maybe Mayor de Blasio's time would be better spent in addressing this problem, instead of wasting time on a pointless campaign for President.
45
@Bill Brown
Um, except Guiliani and Bloomberg, and you think Mr. Dollar from Mississippi is a Democrat or? Sorry, Mr. Brown, your exaggerations won't work.
1
The City of NY issues medallions.
The US government backs mortgage loans.
Both practices encourage manipulation of supply.
Artificial markets breed distortions in pricing, leading to speculation.
Are we surprised?
China and the USSR are good models for our Socialist conceits.
16
Folks licked their chops...
This was the way to wealth! I'm jumpin' in!
I was duped! Somebody dared to lend money to me - an immigrant!
And on and on it goes, the NYT's perpetual motion victim machine.
21
@Jp
How could anyone read that article and come away with such a twisted, cruel impression? These were hardworking immigrants, many of whom spoke very little English, who just wanted to make a decent living but instead were taken advantage of. Where is your compassion?
9
@DE: Wanted to make a decent living? They wanted to cash in on a gamble. You roll the dice, which is what they did. They won't be the first immigrants to do that and probably not the last.
And imagine, some had the nerve to loan money to immigrants! Wow. The horror, the horror, the horror...
13
@Jp the sellers and lenders created nothing of value and destroyed lives in a manipulated market - they're just leeches on society
10
Just more proof that Wall Street banksters are simply gangsters, dressed in suits
9
You should read the article — actually a lot of interesting nuance.
5
I read the article, and stand by my comment. Are you a predatory bankster, shilling for your comrades on Wall Street? Not a single Canadian bank needed a bailout in the aftermath of the Great Bush recession in 2007. Nearly every major bank in the United States did. The difference: effective regulatory oversight. The same predatory behavior by banksters toward taxi medallion holders is a national disgrace.
2
Uber. No mention of uber? That should be in the first paragraph. It has decimated the industry through back channel politics.
Every city it contracts a political insider, and the bureaucracy looks the other way.
Sub minimum wages, not a problem.
Bypassing safety (winter tires not needed ) not a problem.
Downtown Congestion not a problem.
Cannibalizing public transit, not a problem
Paying a fraction that a medallion owner pays not a problem
Sketchy background check not problem
Toxic corporate cul3, not a problem.
The open municipal corruption that that Uber practices, and yet flyes below the radar is staggering.
7
@Tom Uber is mentioned multiple times, and while you clearly want to depict it as the villain - which is admittedly is in many cases - it's not the culprit here:
"Over the past year, a spate of suicides by taxi drivers in New York City has highlighted in brutal terms the overwhelming debt and financial plight of medallion owners. All along, officials have blamed the crisis on competition from ride-hailing companies such as Uber and Lyft.
But a New York Times investigation found much of the devastation can be traced to a handful of powerful industry leaders who steadily and artificially drove up the price of taxi medallions, creating a bubble that eventually burst. Over more than a decade, they channeled thousands of drivers into reckless loans and extracted hundreds of millions of dollars before the market collapsed....
"The medallion bubble burst in late 2014. Uber and Lyft may have hastened the crisis, but virtually all of the hundreds of industry veterans interviewed for this article, including many lenders, said inflated prices and risky lending practices would have caused a collapse even if ride-hailing had never been invented."
12
The city government is still trying to curb Uber/Lyft to prop up the medallion market so the city could sell more at $1 million a pop. Where there is money to be made by government/officials, never count on the government to protect the people
8
The NYT's article is a "hit" piece that is written in an investigation style. They blame everyone except the hapless taxi owner. Every owner that bought a medallion on loan is qualified to be sure the note payment can be made. Now the owners complain they cannot make the payment. Why? Did the interest rate change? No, income went down and thus there was less cash for the note payment. Can you figure out why income went down. Look no further than Uber and Lyft. The owner drivers were undone by disruptive technology, not predatory lenders.
16
These people took a gamble and bought medallions and lost. Happens every day and tuff darts. Time to pay your loan back
18
@NYC Dweller The lenders made bad loans to poor credit risks and now the value of the underlying asset has plummeted. The borrowers will obviously be forced into bankruptcy and the loans will be discharged. Happens every day and tough darts. Time for the lenders to eat their losses.
29
The increasing financialization of the US economy is guaranteed to end badly. Big business have had big government in thrall for over two decades now. I see no end in sight except economic collapse.
7
@MickeyHickey
Yeah, keep holding your breath Toronto.
As Mark Twain said, every profession is a conspiracy against the laity.
What’s troubling is not that it happened, but that for every person of the many that participated, there were many friends and associates who knew about it, but exerted no moral pull to stop it. That is the amorphous upper middle class dedicated to scamming the lower class fools. Even if taxi medallions were fixed they would just move on to another scam.
21
A very long insightful network part article on what is essentially legalized bloodsucking.
Those who argue for free market capitalism on the premise that regulations are unnecessary and industry can regulate itself, need to answer for these kids of obscene and tragic abuses.
Supposedly there are no more debtors prisons. But is what was done to these drivers any better?
9
Great job reporting! I am happy to be a subscriber.
20
I keep asking Republican or otherwise anti-regulation people I encounter to show me an example where removing regulations, or relaxing/loosening them, has had a beneficial effect.
So far, I haven't had a single satisfactory answer.
10
Pipelines!
1
@Kelly Kk Spoken like a Texan!
1
@Jim Bob
I'd skip the Republican bashing. This was all done in Democrat stronghold NY State and NYC. By the way, this mess was caused in large part BT regulation - limiting the number of medallions.
5
This sort of investigative journalism is a fundamental example of the value of the New York Times - makes me proud to be a subscriber - keep it up!...
207
I can't help noting the fake news. Just a month or two ago, the Times reported that cab drivers were being financially ruined and killing themselves because of Uber and Lyft entering the market, with the clear implication that everything was fine until the privileged tech industry came in to crush the poor immigrant. Turns out the taxi industry imploded itself. As usual (lately), the initial PC take about who is or isn't being oppressed is wrong.
21
@Max Actually, that article ran over a year ago, and it wasn't "fake news." (And they reported that cabbies' families were blaming Uber, which is true - even if we now know their beliefs were misguided.) While I agree that the media has in general been too quick to blame Uber and Lyft (and Uber in particular) for all manner of woes, this particular story is a complicated one.
It's basic fact that overall business among taxi drivers has declined precipitously since Uber and Lyft entered the market, and the medallion-pricing bubble popped at around the same time. What admittedly wasn't known at the time last year's article was published was the extent of the taxi industry's own woes ... or the reality that the medallion bubble would've burst regardless of Uber's entry (or lack of it) ... or the fact that so many individual drivers had purchased medallions on the secondary market from unscrupulous brokers. This is all a story that clearly took a huge amount of time to clarify, given the literal hundreds of interviews conducted by The Times (along with the article's writer being helped by a half-dozen other journalists).
10
Yeah. Let’s get rid of more regulations. It’s just killing business. Perhaps, but not ones that run on legitimate business models. This is a gigantic government failure that reaches into every sector and every level. Hope they are doing a better job in other areas. But I doubt it.
7
Bankers have done the same thing with the housing market and student loans - why not taxi medallions as well?
Why are we supposed - Anytime they can exploit the working class they do
8
Surprised. Not supposed.
4
Interesting that this plays out as a victim narrative.
The medallion business is modern day tulip bulbs, especially the day after Uber picked up its first passenger.
How big a regulatory agency can prevent people from making stupid financial decisions, as noble the aim.
I carried a too-big mortgage going into 2008. I took responsibility and took the hit. When I graduated college, I paid off my loans. That’s what responsible people do.
Do we really want to live in a world that excuses responsibility? Even if it guarantees more political power for some?
Maybe DiBlasio should cover the loans. With his money.
26
@Stuart
Excusing responsibility? But that is exactly what you are suggesting! Your focus is on the wrong thing. No doubt your bank in 2008 took your over-extended loan, packaged it with other defective loans into a bond, got their buddies at the rating agencies to give it an A+ grade, which were sold to unsuspecting buyers.
Not only did the bankers know of this fraud, they went and bought insurance that the very bonds they sold would FAIL. When this unsustainable system eventually collapsed, the banks said it was not their "duty," to tell the buyers that the bonds were bad. The rating agencies who took enormous fees for these AAA+ ratings testified it was not required to be based on facts, but in truth should just be their "opinions." This FRAUD is the primary reason that the housing market crashed. Now you may desire to pay for their fraud, but as for myself and most of my fellow citizens, we believe that it should be the con artists in suits who take "responsibility," for their crimes. But, as usual, not one wall street banker, loan officer, appraiser, fund/asset manager, or anyone else involved with the housing collapse went to jail. In fact, not too long ago, most of the banking laws created afterwards to prevent this from happening again were repealed by our Republican congress. The GOP then passed a law saying that financial planners do not need to consider the best interest of their clients when offering financial advice! Is that enough responsibility for you?
11
@Eric
Wrong, Eric. I took my "over-extended" loan, wiped out my equity, paid off the balance, and rented a home until being able to rebuild our family's balance sheet. I never expected, nor anticipated, any programs that would step in and correct for my mistake in taking out the mortgage I did.
When we start playing games that encourage moral hazard, truth leaves the room.
4
@Stuart
Sorry Stuart, you are wrong. Your individual actions (payment or no payment) had virtually no effect on the movement of your loan through the system. Nearly every loan from that era was bundled with other loans and sold as a bond - even if you continued to pay on your loan it is very likely that the bond FAILED. It is these thousand and thousands of of failed bonds in a corrupted system that caused the great recession. Please remember, that the majority of these bad bonds were sold as "AAA+" rated to pension funds involving teachers, firefighters, etc. who simply ate the losses (making less money available for their retirees). There are plenty of excellent books on the subject that will describe the above in detail or you may enjoy an evening at home and just watch the move, "The Big Short."
It is clear that you see your actions as right and honorable and therefore the cabbies should do the same and "take responsibility," just as you did. That assumes a FALSE narrative that the FIX wasn't already in - and it was. Just like the housing market in 2008, the bankers, officials and middle men have already rigged the game - the playing field was a fraud. People who are victims of fraud deserve our sympathy and support, not the added burden that they are morally lesser than thou.
1
"Instead, eager to profit off medallions or blinded by the taxi industry’s political connections, the agencies that were supposed to police the industry helped a small group of bankers and brokers to reshape it into their own moneymaking machine."
The State Liquor Authority similarly ignores its responsibilities and hands out liquor licenses like candy. The ones to suffer are not the licensees in this case, but the public, who are forced to live with endless bars and the end of peace and quiet . . .
3
@Sophocles why are there medallions to be bought and sold in the first place? What purpose do they serve?
3
why would a sanctuary city, of all places, allow this to happen to the poor immigrants? These are human beings, good people all, trying to be good citizens working themselves to near death (and many times death itself) to succeed, provide for their families, and live the so-called “American Dream”? This is a travesty on so many levels....an imaginary border wall....shame on us all!
7
@TB In a word: money. We've seen some spectacularly obvious examples of the extent to which money can corrupt the likes of Donald Trump, but the unfortunate truth is that money corrupts in quieter ways as well -- and, sadly, it's a bipartisan problem.
While NYC's taxi woes date back decades, the fact that its current mayor was essentially paid off by wealthy taxi interests -- while serving as NYC's ostensible "public advocate," no less! -- to block then-Mayor Bloomberg's plan to expand taxi service beyond Manhattan (back in the pre-Uber days) is unconscionable in and of itself.
For those not familiar with the issue: NYC's yellow cabs have been almost entirely limited to service in Manhattan since at least the '70s, never mind the city's other four boroughs. (It's had a handful of exceptions, e.g. rides to/from JFK and LaGuardia Airports.) Residents elsewhere often had to rely on "gypsy cabs" - unregulated, illegal car services with oftentimes astronomical fares - simply to get around, particularly seniors and the disabled.
Bloomberg devised a plan to launch Boro Taxis outside of Manhattan to serve these poor residents, but yellow-cab medallion owners used (future) Mayor de Blasio to try and block it solely because they might SLIGHTLY reduce their business! The archived story about it is at the link in the following sentence (located mid-article): "Mr. de Blasio has long been close to the industry." And to think this man just announced his run for the presidency!
29
Simply the worst of America.
10
Isn't this problem caused by the NYC government with an enormous tax to operate a taxi business?
9
@Pepperman
Yes, they were too clever by half.
As every time the government tries to control a market.
Oops.
5
This travesty is right out of an episode of The Twilight Zone: "To Serve Man."
1
Greedy owners who knew better, inept politicians appointing their inept friends to regulate the industry. Who knew there would be problems. When I read years back that Taxi Medallions were going for over $1million, I figured I just did not understand the business. How could one cab fetch that much for a permit. Lots of people knew it was a disaster waiting to happen but they were either getting rich or did not care.
10
@Jack
Nobody makes you:
Buy a medallion.
Buy a home.
Borrow for college.
Need I continue?
10
what are the options for making a living, having a roof, and improving yourself?
You wouldn’t be ok with market manipulation if you had to be a buyer
4
@Stuart But when you're new to the country and the gov and big shiny banks are telling you this is how to get rich...
Have a little sympathy, Stu.
8
On 1 July 2001, the newly appointed Commissioner and Chairman of the New York City Taxi and Limousine Commission, Mathew W. Daus promised:
"The Mayor's leadership has made the TLC's regulated industries safer, more courteous and consumer friendly. As TLC Chairman, it would be my mission to continue the historic progress made during the Giuliani Administration."
Yesteryear's glowing SELF-PRAISE by the Republican appointee who oversaw the government medallion scheme of "pump and dump" -- HASN'T CHANGED ONE IOTA. Today, over 950 bankruptcies, and not one acknowledgment of a lack of diligence / caution. EXACTLY what we can expect from any lackey hired to pull magic rabbits from these undiscplined mayors' top hats.
1
People were offered a deal to good to be true. Who wouldn’t want a license to print money that always appreciates? The problem is that if you are a fool that is inclined to believe in fantasies, someone will ALWAYS find a way to liberate you from your coin. Change the rules and all you have is a different thief.
2
Uber meadllion costs nothing. People should go and get those.
An individual has to be brain dead to pay hundreds of thousands, even over million, to become a slave to a taxi.
I feel sorry for these fellas.
5
@ANM Actually, Uber permits cost $50,000/year. Each. And I'd suggest reading the other story to understand why so many people bought taxi medallions at admittedly ridiculous prices. The main point of it is that many drivers were basically conned into doing so under false pretenses.
8
What's infuriating about reading this article, is that the people who benefit from this 'scheme' are enabled by elected officials. Elected officials who enable the bankers and money lenders as a tit-for-tat for campaign contributions. These people answer to no government body in particular, and
in the, everyone is exonerated; there's no one to blame or take responsibility, because it is not "illegal," and people accept it as "the way society works."
Infuriating, just infuriating.
25
What an utter travesty.
3
You have access to a HUGE loan to start a business that you would NEVER GET otherwise, that only requires you maintain a car. You take it and give it a go and if it works, wonderful. If you fail at least you took the GAMBLE and so be it go get a job like everyone else.
However if the press and every PC nitwit in the city decides to do special pleading on your behalf to bail you out, you shut very tightly up and see if you don't get bailed out on the taxpayer dime.
7
@CK 1. One of the main *points* of the story is that people shouldn't be given huge loans in the first place that they can't pay back.
2. Another main point is that this isn't some black-and-white situation where entrepreneurs "gamble" on starting a new business, but one in which shady bankers loaned money to people under false pretenses and at outrageously high interest rates -- as was also the case before the 2008 economic collapse with mortgages.
3. There's nothing in here about a bailout, but the fact of the matter is that three consecutive mayors in a row let the NYC medallion situation get out of hand -- along with dozens of other elected officials and scores of people in the city's bureaucracy, in particular the Taxi & Limousine Commission. They could've readily prevented this entire mess, but opted not to do so -- apparently solely to ensure the continued financial returns of the affluent owners of numerous medallions.
Oh, and the mayor who started it all is Rudy Giuliani, now the president's personal legal puppet, so if you feel like blaming people, start with him.
72
@Jeff
Mayor Giuliani did not start it all.
In 1937, Mayor Fiorello H. La Guardia signed the Haas Act, which started the medallion system that remains in place today.
4
@David Weinkrantz To clarify, I was referring to the industry's more recent woes, not the literal beginnings of the medallion system. More specifically:
"New York City in particular failed the taxi industry, The Times found. Two former mayors, Rudolph W. Giuliani and Michael R. Bloomberg, placed political allies inside the Taxi and Limousine Commission and directed it to sell medallions to help them balance budgets and fund priorities. Mayor Bill de Blasio continued the policies."
6
WHY isn't the Consumer Financial Protection Bureau looking into these sharp practices? These unethical practices.
5
@Richard "WHY isn't the Consumer Financial Protection Bureau looking into these sharp practices?"
That's easy: because Trump effectively neutered the entire bureau, to such an extent that it has no enforcement powers of this nature.
On a brighter note, the New York State Attorney General's Office definitely *can* look into these extraordinarily shady business practices.
64
@Richard: Had the same question about the Consumer Financial Protection Bureau until I read more of the article. These loans were treated as business loans, so they had fewer built-in protections than consumer loans. Personal loans of huge amounts, sometimes interest only, to low-income people, most of whom did not understand the documents they were reading. If this wasn't predatory lending, why did they make their customer base people who couldn't understand the loan documents?
2
Isn't that same mayor, what's his name, now running for President? And claiming to be from the Democratic Party?
America is really off course.
20
@Frankster That would be Mayor Bill de Blasio, whose chances of winning the Democratic nomination were already slim, and as of today are all but nonexistent.
That being said: a comment about America being "off-course," coming from a claimed Parisian, is ... well, let's go with "interesting."
6
The fact is that an Uber cab is a Gypsy cab, unlicensed and unsafe. The TLC and the city have broken the contract with us, the people of New York, by allowing unlicensed taxicabs to proliferate, and has broken their contract with the owners of these fraudulent mechanisms, the Medallions, by encouraging a bubble and extracting profits from it at the expense of the workers.
34
@wfw
The "Gypsy Cab" is a construct. Its not a thing. Its a regulatory creation, by a govt agency that is and long has been corrupt. The best thing about the system, is its Iconic status. Past that, its a mess. This article merely points to a most recent problem.
A privately owned car is more likely to be mechanically safer, then any TLC cab. Cabs that might have been inspected by a corrupted public or private inspector. If the TLC is broken, why should we trust the vehicles under their control are safe?
If the TLC is broken, then the public sector has the right to intervene and maybe run that "authority" into the graveyard of history. If the "authority" is not fully serving the public, not meeting their demands sufficiently - the public has the right, and rights to pursue other means. The NYC cab industry has not been serving the diverse needs of the NYC commuter, tourist, or casual rider. Uber/Lyft, as well as other "Gypsy" services that existed long before these start-ups, are doing what the TLC system is not!
The problems with the cabbies and the TLC, is not the fault of Uber/Lyft,etc. The start-up "gypsy cab" enterprise are a symptom of the systemic problems with the NYC cab industry. Not the cause.
7
@wfw "The fact is that an Uber cab is a Gypsy cab, unlicensed and unsafe."
This is 100% false. The TLC not only regulates both Uber and Lyft; it regulates them nearly as strictly as taxis (and these days even more strictly than livery vehicles). All Uber drivers have to have a chauffeur's permit and carry commercial insurance on their vehicles, among scores of other requirements.
Also, as noted in the first part of this series, Uber had nothing to do with the medallion bubble discussed here:
"All along, officials have blamed the crisis on competition from ride-hailing companies such as Uber and Lyft.
But a New York Times investigation found much of the devastation can be traced to a handful of powerful industry leaders who steadily and artificially drove up the price of taxi medallions, creating a bubble that eventually burst. Over more than a decade, they channeled thousands of drivers into reckless loans and extracted hundreds of millions of dollars before the market collapsed."
15
@wfw - An Uber gets rated by the user so it has to perform. You can patronize a person who treats you well, you can avoid those you don't prefer. Progress does disenfranchise those who do not adapt.
4
Leave it once again to the late, great, Leonard Cohen to provide insight and poetry to this tragedy.
Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That's how it goes
Everybody knows
While most of us would sing this tune with wistful melancholy, no doubt our current GOP leaders and their minions would sing it with a cynical smile. That's how it goes. Everybody knows.
206
And "Everybody knows the Captain lied.". The very government we elect to balance interests and protect the weak has failed here, and there is no recourse, with each blaming the other, or offering sound bite defenses.
14
"A dollar bill y'all, a dollar bill" looking forward to the next unregulated industry meltdown, and its blame game. Everyone who participated in this, is to blame. from the drivers to the government to the brokers, to the financial institutions.
Greed!
2
Huh? I just don't get the gist of this story other than special pleading. Bankruptcy is PROTECTION not a burden. I'd love to be protected against my student loans by bankruptcy, I'd gleefully file tomorrow!
3
Please show the economic gain of the taxi owners as they used refinancing as their ATM. This is necessary for a balanced article. The NYT professes to have the records from nearly 100% of loans; so, publish. Without this, readers do not know, with reasonable certainty, if some of the examples cited are outliers or typical.
Question - is the extensive database compiled available for independent analysis? A "peer review" type of analysis would benefit newspapers. A simple suggestion.
5
@Bill "Please show the economic gain of the taxi owners as they used refinancing as their ATM. This is necessary for a balanced article."
No, this is a rationalization used by a fleet owner and one-time medallion broker to defend his own slimy business practices. I think the average reader can assess its validity for himself / herself. (Personally, I thought it was an exceptionally pathetic excuse.)
1
@Jeff, it is a rationalization used by fleet owners and medallion brokers. I don't disagree that your opinion may be 100% correct. My question is analytical and the NYT appears to have the data to answer - to provide a complete picture.
Does the data show that any taxi owner profited from the ATM withdrawals and rising tide? I would like to know. If the majority of taxi owners benefited, that would be important to know. Personally, I doubt it is true. But, I'd still like to understand all of the facts. Was it 1%, 10% or 49% where the benefits outweighed the costs? If there were any, I suspect they were the few that got in early and then sold their medallion to get out. How many?
De Blasio has no business running for president when he can’t get his own backyard in order. Elizabeth Warren would never let this happen even if it required some “anger.” This is going on all over America with deregulation, predatory lending and payday loans and every other contraption to cheat people from the fruits of their hard work.
143
@Allright I think it's safe to say these articles have ended de Blasio's already-slim chances of becoming president!
This is how you enslave brown people in the 21st Century.
11
And of course, Michael Cohen's taxi finances have been reported in these pages. Michael Cohen was Trump's lawyer.
17
"Preying on immigrants! Who knew so much money could be made?" --current White House residents
7
Owning a cab is a business. Further, it's a business where the gov't, not the business owner, sets the prices one can charge. It seems that it should have been obvious that the monthly payments on a loan of $600,000 and up would leave the owner with little left to live on. Even if the medallion price did not crash, all the time spent driving, before selling the medallion, would only sustain a poverty level of income.
It's like paying hundreds of thousands of dollars for a low paying job.
5
The usual response of liberals, including the editorial board of the Times, to predatory and malevolent business practices, is to hire and empower more regulators.
But often times, as in this case, that doesn't work. Sometimes it even does more harm than good.
There's a lesson here.
My own feeling is that we were too lax in prosecuting the many individuals responsible for the real estate bubble, which, when it burst, led to the great recession. There should have been more aggressive prosecution, and more jail time for guilty individuals. That would have sent a message.
Instead, we did little, and were just thankful that it was, seemingly, in the the category of "this too shall pass."
And so, history repeats itself. To a great extent, this is on then President Obama, and his Attorney General, Eric Holder.
Overly aggressive prosecution is hardly a good thing. But burying one's head in the sand is not such a great idea, either. There is an appropriate balance, and we didn't find 10 years ago.
And there's President Bill Clinton's pardon of Marc Rich. But, I digress.
15
@Alex
You’re contradicting yourself. It wasn’t the liberals who didn’t prosecute these criminals, it was the right wing conservatives. Remember that the crash happened under the Bush administration.
40
@Alex
It is bipartisan policy.
4
@DrG
It is bipartisan policy.
1
This article suggests to me that the law is not clear enough in regulating this industry. If this kind of abuse is to be prevented by the federal government (or NY and states could do it), then we need serious leaders (Elizabeth Warren, anyone?) willing and able to take the reins.
4
The arrival of Uber and Lyft caused the crash in medallion prices. The actions of government officials could hardly have prevented that.
The fact that a medallion cost $800,000 at one point shows just how necessary it was to sell more medallions to the public. Bloomberg did not even go far enough with that policy; the success of Uber and Lyft shows that the government allowed for many fewer medallions than was necessary to meet demand.
As with any significant change, there will be people who lose thanks to the rise of Lyft and Uber, and they should be compensated. However, the people who benefit from the more reasonable supply of for-hire vehicles vastly outnumber the people who benefited from the previous unfair arrangement.
3
@George
Did you not read the articles? Medallion prices were artificially inflated. Lenders saw easy marks in unsophisticated immigrant buyers who came to the table as trusting rubes.
Human greed prioritizes expansion and profit at any cost, without protection for the vulnerable. Capitalism will always be corrosive and predatory unless we build in safeguards and allow for proper oversight.
Not under this government.
14
It is hard for me to accept that our society still permits such brazen, vulture-like conduct. But, it is exactly this exploitive, self-serving, hardly legal business behavior that sustained Trump's inherited empire. It is anti-competitive and undemocratic. It is who we are, until we choose to become something better.
327
@Joan Johnson - Knee jerk political correctness, a lack of respect for simple principles of property rights, and a resort to invoking Trump where he has no relation. Congrats three horrible strikes of illogical magical thinking and you are out.
9
@Joan Johnson It's hardly new, but it definitely has gotten worse lately, with the SEC, FAA, EPA, NRC, & many other regulatory agencies both underfunded AND cozily in bed with the industries they are supposed to be watching. Democrats shrugged off the same results after the housing crash.
It's the Magic of the Free Market, don't ya know!
"Buyer Beware" might as well be our national motto these days.
9
@Joan Johnson But this isn't about Trump. De Blasio, Yassky---Democrats.
5
What am I missing?
If a crook lends you $1 million to buy a medallion during a bubble that isn't worth nearly that much today, walk away. Let him take the medallion. File for bankruptcy if necessary. They don't care about you; don't care about them. Donald Trump has done repeatedly.
123
Recourse loans. Many of these folks put up their own homes as collateral and lost the roof along with the worthless medallion.
11
@Somewhere What you're missing , for starters, is that the borrowers in these cases weren't educated in the art of the (fraudulent) deal like Trump, but rather the explicit targets of predatory lenders out solely to make a buck for themselves -- in many cases knowing the borrowers would likely default on the loans, thus allowing the lenders to repossess their medallions and resell them to another unsuspecting dupe.
You're also missing the broader narrative of how obtaining a NYC taxi medallion was long viewed as one of the few reliable paths for working-class folks -- and, in more recent years, newly arrived immigrants -- to attain a decent enough living to create at least a semblance of the "American Dream" for themselves and their families. Instead, they fell victim to one of our capitalist system's worst injustices.
Finally, you're missing the reality that declaring bankruptcy -- for normal folks, not millionaires -- is financially devastating, and typically requires people to sell off ALL of their assets worth more than a penance to repay their creditors. Trump and others like him avoided doing so by placing their assets in separate LLCs that could go bankrupt without affecting (or requiring the sale of) any of their other assets to repay creditors, thus leaving the lenders holding the bag. Serial con artists may know these tricks of the trade, but average Americans can't afford personal accountants adept at manipulating the system to their own advantage.
11
Let the buyer beware.
6
If you look at the names of bidders on board in the picture, you see names of Middle Eastern, Chinese, Indian, and other immigrant origins. They were cheated out of their future by people who have been here a long time and know how to work the system.
263
My parents and grandparents are immigrants from one of the ethnic backgrounds you listed and I found your statement patronizing. Caveat emptor—these cabbies didn’t read the fine print or think through the financial ramifications of their decisions, and that’s on them. Being an immigrant is not an excuse for failing to do one’s due diligence on a poor investment.
22
@Brian Too easy to absolve drivers of blame. Get someone to help you understand the contract, preferably. someone who has no skin in the game.
8
True, but look at the names of the brokers. Many are recent arrivals from Russia and Poland. Friedman is a Russian refugee. Immigrants preying upon more recent immigrants.
15
The concept for a cab medallion was unscrupulous to begin with. Ironic the government can't regulate how many children poor immigrant families decide to have- but they can regulate the number of taxi cabs through an elaborate pyramid- financing scheme.
And here's what destroyed it all:
"Two former mayors, Rudolph W. Giuliani and Michael R. Bloomberg, placed political allies inside the Taxi and Limousine Commission and directed it to sell medallions to help them balance budgets and fund priorities. Mayor Bill de Blasio continued the policies." And they want [wanted] to be President of the United States! Ha Ha Ha !!!
161
Clear statement about our current society that there are only three comments on the massive ransacking of these newcomers following all of the rules to forge a worthwhile life for themselves and families. DeBlasio toots his man of the worker, progressive horn. Uber and Lyft should be banned. NYC government needs to step up with dollars to fix this mess for these cab drivers. How’s about consequences for those who were in charge as they fall over themselves blaming each other?
28
This should absolutely trigger civil litigation, at the very least. Good job.
59
“Mr. Dollar, who left government to become a consultant for credit unions...”
But he didn’t leave government, did he? To the contrary, as a consultant, he’s fastened onto our government more tightly than a leech.
35
This is how Michael Cohen, Trump's lawyer, made his money. The rich get richer and the poor get poorer. It's time to get Elisabeth Warren in charge.
377
In an article where ever nearly elected official to blame is a Democrat, you still manage to hang this on Donald Trump? Incredible!
12
@Matt Williams
Trump is the ultimate symbol of this kind of conduct writ large. There are bad apples with different labels; Trump happens to be the rottenest, ooziest example, and bears mentioning.
15
@Peter Tobias Yeah, that was we can ALL get poorer together!
1
Another obvious question is how could this all happen while Barack Obama was President?
13
All I can say " The Mississippi Credit Union Hall of Fame " an honor that we all van be envious of.
11
A guy named Dollar running a Bank. Now that’s rich.
80
The obvious question: How does a poor cab driver get a loan for a $700k + medallion?
324
@Jennifer - Anyone can get a loan if they have recoverable collateral which cannot be damaged by the buyer, which is medallion. They probably could not denied the loan, which is why the rates were so high.
24
@Jennifer
Careful.. This is the NYT and you will be labeled "anti-immigrant" asking those types of questions!
27
@CK Please help me understand your reasoning:
Are you stating the not-yet-purchased medallion *was* the collateral for the loan to purchase the not-yet-purchased medallion?
25
Is it a surprise that the government we pay handsomely to serve us well served us not at all?
95