A person purchases a taxi medallion which they have no chance of paying off based on the future earnings of the taxi.
The only way to break even or come out ahead is to be able to sell the medallion at an equal or greater price.
This is called speculation or gambling - regardless of whether or not you were born in this country. Claiming victim status due to being an immigrant adds to the gaming aspect.
No bailout for you.
Next.
27
@Jp , it looks like the people who openly preyed on these immigrants' ignorance knowingly manipulated the taxi medallion market. And in doing so, they may have committed crimes. No plea bargains for them. Disgorgement of ill-gotten gains to the people who believed that the medallion market was a free market, not a manipulated market.
9
@NR : "knowingly manipulated the taxi medallion market."
And if the so-called manipulation had not reached a breaking point, it would have been held up as an example of the greatness of NYC.
Face it, the folks who bought the medallions dreamed of turning a HUGE profit and living the dream. Sorry, sometimes that sort of thing doesn't work out. The speculation was also on the part of the so-called victims. They were at the end of the chain. It happens.
5
Caveat emptor. If they could not speak English how could they communicate with their passengers? Are most of the "investors" even legally in the country? Maybe ICE should be required to verify immigration status before the medallions sold - like a "background check".
5
Never been in a cab, huh?
9
They bought low, sold high and got out of the market before Uber and Lyft took over. I’m not sure what the issue is.
17
Sounds like some unwise investment or maybe Shylock loan practices. Why didn’t these immigrants NOT fall for this bubble market: Being in a new country and trying to be like everybody else and get on the bandwagon , that’s probably why
The Taxi Medallion scam in NYC and Chicago was allowed to occur to make way for well connected venture capitalists backing Lyft and Uber. How do major cities who’s “Commissions” give and sell taxi medallions to drivers, giving them exclusive rights to pick up passengers in a designated area, then blindly allow a huge corporation to take control of that market?
In 2012, NYC green taxi medallions were sold to immigrants to make up for the lack of service in the outer boroughs. A lot of money was made by NYC and the connected brokers facilitating those transactions. These revenues were also used so that the NYC budget could appear balanced.
These two large taxi markets were taken over by large connected venture capitalists and all those privy enough to have profited from the long awaited IPO’s.
Two types of people in this story - primary contributors and secondary manipulators.
27
@Chris D Taxi medallions were a scam from the beginning, which was long before smartphones existed. The real crooks are the government employees who began issuing them.
4
@Chris D :"In 2012, NYC green taxi medallions were sold to immigrants"
They were sold only to immigrants or are immigrants ?
They shouldn't have been sold to immigrants?
Aside from the predatory lending, which I believe our government sanctions, though it should not, I fail to see a 'bad guy' in this lengthy article.
People get taken advantage of in market speculations very day.
That's why we have the legal warning of caveat emptor.
16
@two cents
Exactly correct. Everybody loves the "free market" until they lose money.
12
So it’s just a coincidence that those who lost their shirt are immigrants who aren’t connected to Gary Chico and Patrick Daley?
6
@two cents
Very true. But then no reporter ever won a Pulitzer with the story, "there's no bad guy here."
2
Capitalism and corruption - you can't have one without the other.
3
New York and Chicago city government officials are directly responsible for these cabbies' desperate situations.
These officials restricted the supply of medallions, creating an artificial scarcity. That totally-artificial scarcity enabled savvy, deep-pocketed investors to buy-up medallions and to bid-up the price.
Had the medallion system not existed - had taxi operator licenses been issued to anyone for a nominal fee (say $100/year) - the only licensees would have been those, who wanted to operate taxis. A medallion never would have been an "investment".
Greedy (or stupid) officials put limits on taxi license issuance, so they could boost city revenues by auctioning artificially-scarce licenses.
Put the blame where it belongs: on the public officials - elected and appointed - who created a scarcity that should never have existed.
Those, who bought these taxi medallions, have only themselves to blame. Even if they were not literate in English, they could have found an attorney, able to translate the contract before they signed. It seems few did so. That is entirely their own fault.
Many investors do not do "due diligence" and suffer as a result. They deserve as little sympathy as do those, who buy drugs "on the street" rather than from a pharmacy.
2
Unless Trump’s packing of the Judiciary with extremist Steven Miller like ideologues, is reversed, there will no longer be any compassionate bankruptcy judges left who could use their powers to invalidate such ill-gotten predatory debt and reverse that damage that is driving a significant number of cabbies to suicide!
5
I live in Chicago. I heard about the medallion scam from cab drivers several times starting in 2008. Whether city officials missed it negligently or willfully is a question. In Chicago, so many city officials are corrupt that they really don't even realize it. For instance, this hack quoted in the article, Rosemary Krimbel, a multiple Rahm stooge saying she 'believed that city regulators and medallion lenders had acted appropriately. “The borrowers signed the loans,” she said. “It’s kind of ‘buyer beware.’”
It was her job to regulate the taxi industry, which included protecting the drivers who make it go. Instead, she protected the privateers and plunderers. I'll bet she thinks she's one of the good guys. That's Chicago.
5
The names of these predators and their businesses should be made public.
3
This confirms my thoughts about New Yorkers. Wealth and greed seem to be the watchwords here. People no longer look out for each other. Most are only trying to rip the the other. They call it “business”. What a sad commentary and testimony to people who would rather worry about their dog than another human.
4
Then Uber arrived with a better solution than walking to the curb in weather and waving your hand, and the medallion monopoly that made city council members rich tanked.
Of course the sleazes from New York, where the medallion madness ruled, got rich(er).
2
Just what I want in a taxi driver -- someone who doesn't speak English very well.
2
In an amazing combination, reading this report and the other article in the NY Times by Monica Potts: "In the Land of Self-Defeat - What a fight over the local library in my hometown in rural Arkansas taught me about my neighbors’ go-it-alone mythology — and Donald Trump’s unbeatable appeal" crystallizes the reason why USA is spiraling down.
The combination of "Free Market" and "Small Government, i.e. do nothing to protect the vulnerable citizens" ideologies has deeply crawled into American consciousness and taken over. The brainwash is quite thorough. It enables predators to destroy lives of the clueless, and along the way also destroy America's infrastructures such as transportation, education, and healthcare. So sad.
2
@Observer So you’re saying that a situation that is a foreseeable result of a government-enforced cartel is the result of free markets and small government, and you say that others are brainwashed?
2
I wonder how long it will be before the Uber/Lyft massive exploitation of drivers becomes the next story. We are already seeing lots of articles about how these drivers make barely minimum wage.
Yet this form of "disruption" is readily defended as better for consumers, etc. Today it is cab drivers. Tomorrow it will be long haul truckers. And the next day it will be anyone who works for a living.
Exploitation seems to be in the eye of the beholder.
Blame capitalism if you want; but look around first and you will soon realize the incredible life we lead would not be possible in a socialist world. Innovation now drives our economy and economic incentive drives innovation.
This formula is part of every aspect of American life from healthcare to the law.
How we achieve balance between innovation and exploitation will define how history judges our actions
I feel badly for the people who lost money but I agree with Mr. Levine who said “It was a good business opportunity. That’s all.” Some people were smart and saw a way to make some money on a poorly regulated market. Others were not so smart. The smart folks made money and the not-so-smart folks lost. And now, "This has to be somebody's fault."
So you lost your life savings and I made $150 million and I buy a polo club. Whose "fault" is your loss, besides yours? My fault? I should have made $150 billion on currency speculations like Soros, and wiped out 1000 times more people. Then I'd be a hero. What the "winners" did with their money is irrelevant. Of course I'd want to spend my money on a few things. That does not make my profits wrong.
I will tell you whose fault this is. It is the fault of city governments for creating artificial assets based on unfair regulations. Why did people ever have to buy a crazy thing like a medallion to drive a cab? A nurse does not have to buy a nursing medallion. He just has to become properly educated and trained, pass a test, and pay a few hundred dollars a year for a license, a fixed price license. The primary scheme here is that of the city governments to distort the free market.
Ultimately, the artificial price of the artificial barrier, the medallion, collapsed. The root problem is the very existence of medallions. The city should buy them back at a reasonable fixed price and end this crazy system.
4
It's interesting that everyone is blaming the "Capitalists" for this crisis but before UBER and LYFT, medallions created monopoly pricing with no competition. That monopoly system lasted a long time and no one complained.
Areas in Chicago were not served by cab drivers and the profession was much more dangerous.
We now have a system that is easy to use, cashless, and matches the identities of the driver with the customer.
While I feel sorry for those that took out loans to pay over-inflated prices for the equivalent of 21st Century Tulip Bulbs, don't blame the economics of Creative Destruction.
Long term, the technology is better and that is why customers are using these apps over hailing a cab in downtown NYC or Chicago.
4
There is a moral to this story. It is that the purposes of government regulation in any industry is to protect the public from this type of predatory capitalism.
We've seen similar tactics used in other markets, like housing. But in the taxi market, where the city limits the number of medallions the creation of a near monopoly was an invitation to disaster.
Essential human services, like transportation should be controlled by the government in an open and transparent way.
If the sale of medallions to a single owner and other regulations had been met they wouldn't have been able to drive up the price and force these working class cabbies into exorbitant loans, simply to earn a living.
This tale also underscores the difference between the Main Street economy and the economy of high finance. We expect investments into the Main Street economy and borrowers who start a business are willing to pay a fair rate on their loans.
But the finance capital boys are only interested in manipulating the market, driving up the price and then getting out. It's like a game of musical chairs. Except the drivers are the ones with the least leverage and they and the public are the ones who always loose.
Rep. Ocasio-Cortez is right. Take over the debt, just as we did with the banks, only this time bail out the drivers and put their cars back on the street serving the public.
1
All markets are unfair to the little guy.
The root cause of the problems with the Taxi business is a poor product as any taxi customer will tell you.
The opportunists simply timed the markets rise and fall the same way the 1 % time the financial markets.
If you think Government is capable of equalizing market risk, or even should ,think again.They saturday morning quarterback the problem.
As a young man I had to get on my knees to get a business loan. It was so hard to get approved that a popular saying was that to get a loan you had to prove you didn't need the money. Now as an older man I am frequently told I am pre-approved to to borrow money for this and that. Over the years I have made some bad decisions to buy or borrow and never thought to blame the seller/lender. It was always my decision. Caveat emptor is a moral principal that goes back to the Romans. So it is hard for me to accept that others, like the taxi drivers drivers in this story, want to blame others for their bad decisions. The flip side of freedom is personal responsibility. It seems today like so many want to blame someone for what they do.
1
Stay calm and let the market take care of us. The country will be just fine, as illustrated with the cab industry.
1
@Lazlo Toth The market is not the problem. It is the perverse incentives created by gov't regulation.
2
@Lazlo Toth You do know, of course, that this situation arose precisely about government distortion of the market in the form of taxicab medallions.
1
The only question that I think remains is one of historical process. We've established that the system American capitalism--and this is interpreted by some as a huge plus--is the most efficient ever devised at creating wealth through recognition and exploitation of "nature red in tooth an claw." People came, and come, here from Asia and Europe and elsewhere, for hundreds of years and still now, to extract wealth. And uneven the playing field. Let's not kid ourselves about any other superlatives, they're not there. Yet at times there have been social movements to try modulating the ferocity, to level the field, to tame the beast. This was the genius for self renewal. Is it still there?
An immigrant cab driver making $20,000 a year gets a bank loan for $400,000...what could go wrong?
7
These people, the medallion owners did this to themselves. They kept refinancing their medallions which were going up in value to take out money to spend on homes, education, more medallions, and on good times. It all came tumbling down when Uber and Lyft and smartphone apps came along to offer viable competion. Riders, tired of rude drivers and smelly disgusting cabs, switched from yellows to Uber and Lyft and the value of medallions plunged as did their share of the business.
Most medallions are owned by business people who rent them out to drivers. Some medallions are driven by owner/drivers but they are a minority and they were doing the same thing.
In the end, when medallion owners walk away from their medallions which were the collateral for their loans, the big losers will be the medallion owners and the finance companies, some of which have already gone under, like Melrose and LOMTO.
You have a need to blame someone? Blame smartphone apps, Uber and Lyft though they did not do anything wrong. They presented a more attractive alternative.
Time marches on. When's the last time you hailed a horse and buggy?
5
It's called the old "Pump And Dump"..
Two points: Symon Garber, a New York fleet owner originally from Ukraine, was on vacation in Moscow... and Michael Cohen were involved. This business stank just based on the people involved.
4
This is another sighting of the tip of the iceberg of sleazy capitalistic practices that undergird much of America's "wealth". Behind every great fortune lies a great crime. And here we have commenters effectively blaming those who got conned for getting conned. The fact is, given the current criminal family operating out of the White House, who can be surprised by any of this? I do feel sympathy for those who got trapped by financial manipulators, specially those immigrants who believed the mythology of the American free marketplace. What struck me about the earlier article about medallion manipulation in New York was the involvement of supposedly non-profit credit unions, whose CEOs were making massive salaries. Apparently there are no real constraints on entities called non-profit. Just another in a long series of American scams.
125
@aoxomoxoa Non-Profit 501 c-3 designation from the IRS has no relation to ethical CEOs or not making a profit. Many of our hospitals, universities and human service organizations are labeled as such to allow for fundraising, foundation donations, galas, government and private grant receiving and a multitude of other ways to bring in huge sums of money under the guise of 'helping'.
5
@aoxomoxoa The White House has nothing to do with this. It is a generation of people who were raised with decadent values. You cannot blame anyone but yourself if you are a parent.
2
@aoxomoxoa I too was shocked that Federal Credit Unions were involved in this charade. Speculative lending such as this is anathema to their charter. I did notice that one of the credit unions is no longer in existence.
2
To summarize the article, the evil New Yorkers were the first to bid more when everyone thought that prices will go up and they where first to understand that prices are heading down and sold out.
While being outbid on a medallion or a house or any asset is unpleasant there is nothing nefarious about it, even if its done by a non local.
When you sell your house will you refuse a higher bid if from a non local?
Furthermore its hard to fault medallion owners for trying to sell when they believed that prices are headed down.
They were not privy to any information that was not publicly available. Any thoughtful person may have suspected that Uber will impact the value of medallion prices.
Its no excuse that the broker "convinced" me to mortgage the roof over my head .
The most that can be said is that perhaps you make a rule outlawing unsophisticated investors gambling money that they cannot afford to lose.
64
@Ben The problem with your analogy is there isn’t a controlled monopoly in the real estate market. Basically, public transportation is a utility and needs to be regulated.
40
@Ben The nefarious part is the deliberate escalation of medallion prices by people selling them between themselves back and forth to force up the price, similar to the pump and dump market manipulation, which is illegal.
52
@Marie
The pump and dump seems to be a side story here . The essence of the story appears that New Yorkers perceived Chicago prices as cheap in comparison to NYC.
Even after the so called pump the article makes clear that there was a stampede of anxious buyers at even these inflated prices .
From 2006-2012 apparently many people thought it was still worth it .
Perhaps there was a pump but if not for Uber in 2013 there likely would be no dump .
6
Who really caused this problem? The greedy speculators or the city governments who created an artificial limit on medallions so the city could line its pockets on something it felt it could control and tax . The shake down began at the city governments doorstep. When one creates a artificial monopoly don't be surprised by the results.
183
It’s not really a monopoly, and no ones accusing the cities of artificially inflating medallion prices to make a bunch of cash. They limited the number of medallions, and that made them valuable, but it was the secondary market that led to the 7x price increase over a few years. The regulatory scheme had been in place for decades and remained quite stable until the speculators moved in
43
I don't know about Chicago, but the reason that New York City imposed a cap on medallions was that, by the 1930s, cabs had proliferated to the point that city streets were choked with cabs and cabbies couldn't make any money. When the cap was imposed, there were well over 30,000 taxicabs, and the number was growing rapidly.
When medallions were first issued in the 1930s, they were nearly worthless, so much so that, when a medallion owner retired or died, the medallion was often abandoned. By the 1950s, the number of medallions was down to slightly more than 10,000, and their value had risen to about $100 each, or the equivalent of about $1,000 today. (Medallion prices topped $1,000,000 a few years ago.)
In my opinion, the problem is not that New York put a cap on the number of medallions. The problem is that New York made the medallion not a temporary license to operate, but a permanent piece of property that is transferrable in perpetuity. Those who bought up large numbers of these properties in the 1950s passed them along to their sons, and now their grandsons, who became rich without ever really working, much less driving a taxicab, a day in their lives. Thus came into being a corporate class of taxi owners whose wealth came from exploiting drivers, successfully busting the taxi driver's union, and manipulating medallion prices ever higher.
180
@1515732 If you read the article, it seems that the city of Chicago was able to run a medallion system effectively prior to speculators descending on the market. This passage demonstrates this: "At the time [prior to the medallion speculation bubble], the Chicago industry was dominated by a few operators who made money through fares, not financial maneuvers. Two fleets — run by members of the same family — controlled most of the medallions, and the permits were worth so little that the city periodically gave them away to drivers. There was a private market for those who could not wait for a city giveaway, but it was sleepy."
15
The comments on this story reveal what the real problem is with our politicians, our businesses, and our society - we say things like "It isn't illegal, even if it is unethical" or "People get taken advantage of in investment transactions every day"; a virtual shoulder shrug, and move on. One commenter remarks, "When you sell your house will you refuse a higher bid if from a non local ?" as if the answer is obvious. Yes, I would refuse the bid if the non-local was buying up all the houses in my neighborhood, kicking out my neighbors, and then leasing their homes back to them at exorbitant prices. Why cheer people finding a way to exploit others to their benefit?
286
@William
Spot on, pal.
I couldn't agree more and my house (the empty nest) should be going on the market next year. I won't be looking for the highest price but would like to sell to a young family who'll make good memories and happiness in it.
True assets don't have a price tag.
41
@Fred Humble “You won’t be looking for the highest price “
Would you sell it to a worthy family at cost ? Same price as you bought for .
If so I am sure many worthy families what like to contact you for consideration .
Or is selling for a profit ok just not too much profit ? How much is too much .
If a worthy family offers to pay three times what you paid for it will you say nah that’s too much take it for twice how much I paid ?
7
@William
So its Ok for the city of Chicago to exploit drivers by offering to sell medallions that cost them nothing instead of giving them away for free .
It's ok for those drivers to exploit riders by charging fares that are higher than would have been without the monopoly .
Its ok for those drivers to by a second medallion as an investment and exploit another driver by only paying the wage for a simple driver and keeping the profit .
Is ok for those same owners/drivers to go back to the bank after some time and borrow more money against the now more valuable medallion, and do this again again for years .
But if a New Yorker offers to pay more than the locals then the New Yorker is the villain and everyone else is a victim .
8
Sounds like the IPO market almost. Dive up the price with limited supply and fake demand. Then pull the rug by removing fake demand and flood supply.
2
What's the takeaway here? Greed is good, it's the American way.
2
That's what you get when you artificially limit supply, in this case taxis via the medallion system.
9
No mentions of the driver/owner suicides that resulted in NYC???
Did the Times miss that here?
40
@SmartenUp My Times colleagues have written many stories about cabbie suicides, including these:
https://www.nytimes.com/2018/12/02/nyregion/taxi-drivers-suicide-nyc.html
https://www.nytimes.com/2018/10/02/nyregion/suicides-taxi-drivers-nyc.html
https://www.nytimes.com/2018/05/01/nyregion/a-taxi-driver-took-his-own-life-his-family-blames-ubers-influence.html
1
Great article ! Sadly all these characters are still involved in NYC taxi Medallions and Large fleets,
And City of Chicago and NY City just watched and still watching all this going doing right under there nose.
Good work NYTimes !
And all who contributed.
22
Buying a medallion is essentially like buying stock. It’s betting on the future of an enterprise (taxis). Any stock or business should be fully understood BEFORE an investment. There was a market disruption (Uber, Lyft), that really hurt. Things like this happen in all industries.
15
@Bk2 Equities are traded on regulated exchanges. Taxi medallions? Nope! Big difference.
31
Actually, the nature of the Taxi business is quite different. It’s really more like a public utility that is highly regulated by the City. A big part of the problem is that the City was complicit with the ballooning value of the medallions. The Taxi and Limousine Commission (TLC) was quite happy to reap millions (if not billions) of dollars worth of newly minted medallions, and then actively marketed them as a better investment than the stock market! Then they looked the other way while the lending companies and fleet owners manipulated the prices. Talk about pump and dump. Clearly the TLC didn’t understand the industry they were supposed to regulate. This is largely because the people appointed to run this agency were mostly political cronies.
That said, for many years, the Taxi industry was a golden goose to NYC because these medallion sales could quickly raise billions of dollars out of thin air for the benefit of the City. So, from this perspective, allowing Uber and Lyft to grow to over 80,000 cars (vs. 13,000 yellow taxis) buried the industry so that no one driving could make a living wage. Moreover, because of the proliferation of these Uber/Lyft cars, there is less demand for mass transit while the streets have become Uber congested. So the City’s “solution” to this problem is not to overhaul the industry, perhaps to a reasonable number of cars to serve the public, but rather more taxation via congestion pricing.
3
This should be a cautionary tale for other cities
8
@Lawyermom this should be a cautionary tale for people who take out loans and don’t understand the market they are investing in.
14
Great reporting! Such a sad story told so many ways in our country - greedy individuals who create a bubble by deliberately driving up prices and knowingly set up those at the end while they cash out.
19
It was an unregulated marketplace for trading taxi medallions. It's sad that people are so gullible, but much of what occurred was -- unfortunately -- legal. But the loan-makers (aka: loan sharks) and their lending terms? Not so much. WHERE were the state AND federal banking and lending industry regulators?
21
Survival of the fittest. Hence the need for informed citizenry.
5
Why hasn't some sharp lawyer representing the Chicago cabbies filed a class action suit against the parties responsible for their misery? Obscene profits are supposed to be followed by inevitable litigation. That, after all, is the American way.
7
Because there's really not much merit to a lawsuit based on the argument that "I was greedy and stupid and lost all my money. It's not fair that I got stuck with this junk when the price went down, before I could sell it to somebody else and stick them with it. Please make someone else pay for my mistakes."
14
Capitalism - the great alibi for most of the Western world's sins of the past millennia!
Don't know what a better alternative is, but there must be one!
10
@CJ P How about a little Northern European Social Capitalism? Balance out the risks and rewards. Soften the extremes which have led to so few with so much. You can have wealth in the hands of a few, or a Democracy. You cannot have both.
3
For some reason, many Yankees are quite proud of their lawless approach to business. This doesn't surprise me.
Those descended from immigrants nevertheless shamelessly exploit immigrants in the worst way. This doesn't surprise me.
The idea that if you can get away with it, no matter how obviously unethical it is, you should do it if it makes you money — is what the nation's leaders all the way to the top consider normal. Those of us who practice good fellowship and restraint are considered stupid by those now in power. This doesn't surprise me.
Yet contemporary americans (especially older, wealthier ones) constantly complain about bad service, impoliteness, a lack of work ethic, poor treatment, an inability to speak english properly, poor troubleshooting skill, thickheadedness on the part of workers here. And that surprises me.
From the soap box and directed at old white people like me: You can get rich quick by ruthlessly exploiting workers, immigrants and the poor with a government that does nothing to protect them, or you can have a nice society where live is fair and things work well — but you can't have both.
It's time to pressure all politicians to change the system. We need basic fairness. People who exploit others ruthlessly should be stopped, even punished, not given pride of place.
Societies don't just get the governments they deserve. They also get the low quality, unsafe, inept service industries they deserve. More regulation please!
31
Couldn’t Chicago have had a rule selling only to in-state buyers. ?
7
@Elizabeth It wasn't in former mayor Rahm Emanuel's best interests, so to speak. Read this, and you'll understand how this happened:
https://www.commdiginews.com/business-2/ari-emanuels-billion-dollar-uber-payday-and-what-it-means-for-rahm-24532/
Always follow the money. ALWAYS.
2
Me Levine's business practice of selling his entire fleet of Chicago taxi medallions starting in 2012 for huge profits is proof that insiders were well aware of Uber/Lyft arrivals and what it would do to the taxi market, since nobody had in mind to regulate the newcomers!
It's obvious that San Francisco's players must have known from Mr. Levine and others yet had the urge to cash in last minute and sell their SF taxi medallions that before were handed out for free by seniority to drivers on waiting lists. They must have known by doing that they were crashing their retirement dreams since these medallions now can't be sold any longer yet sending drivers off their purchased homes,braking families and end for mostly poor educated immigrants in bankruptcies. NYTimes please investigate San Francisco next!
6
"insiders were well aware of Uber/Lyft arrivals..."
ummm, anybody who didn't have their head in the sand was aware of the arrival of Uber and Lyft.
9
Cities created a monster: a system designed for exploitation. And it seems that the laon business is completely unregulated when it comes to scams.
Wasn't this one of Michael Cohen's "legitimate" businesses in a cahoots with his Ukrainian father-in law? ( It's easy to forget there were other long time Russian and Ukrainian connections one degree away from Trump)
7
Yawn. Manipulative businessmen, greedy lenders, lives destroyed. Isn't that capitalism? Isn't that what we are fighting to protect? Gov't intervention would mean a socialist society, no? So what do we care about a few immigrant cab drivers going bankrupt, losing their earnings or immolating themselves? But some people were able to buy multiple homes and even a house in the Hamptons! They lived the American dream. Isn't that what this country is about! Proud to be an American.
9
What about bankruptcy protection?
1
because New York prices became grossly inflated. He said he profited because he made the smart decision to--- buy low and sell high."
buy low, sell high! Isn't that the definition of INFLATION?
Follow the money and the underlying basic human characteristic of GREED. Everyone saw ONLY PROFIT here and perhaps they all deserve what they got. This is no different from "FREE SHIPPING" when the consumer pays INFLATED prices to get "free shipping". There will always be a ship of economic fools sailing near you" art any one time.
1
You can't keep people from making bad investments. It's the housing crash of 2008 all over again. Like they say in the market, bulls make money, bears make money but pigs get slaughtered.
2
But are we sure that the campaign was not colluding with the Iranians?
1
Looks like a Congressional investigation is in order.
Ride-share has made Chicago’s already impossible evening rush hour a rage-inducing traffic clot, increasingly dangerous to pedestrians as frustrated drivers accelerate through yellow lights and anticipate green lights with rocket starts. Ride share drivers are bumbling and hesitant. They stop mid-block halting all the drivers and buses behind them while their awkward, fumbling riders grapple in and out. Frustrated drivers whip into adjacent lanes and it’s a riot of slammed brakes and angry horns. Enough, already. Let’s institute a $1-a-ride surcharge on every ride share trip starting or ending in city limits. Restrict pick-ups and drop-offs to the far ends of side streets. Aggressively ticket scofflaws and double-parkers. If you don’t want to drive your own car to work paying $20/day or more to park then you should still be happy to pay only an additional couple of dollars in a surcharge to offset the costs and inconvenience for the rest of us citizens who walk or use public transit. I’m tired of the inconvenience in my life subsidizing your selfishness and greed.
8
@hey nineteen You have Rahm Emanuel to thank for that. This will refresh your memory:
https://www.commdiginews.com/business-2/ari-emanuels-billion-dollar-uber-payday-and-what-it-means-for-rahm-24532/
Excellent title page photograph by Alyssa Schukar.
You can’t cheat an honest man.
In a world increasingly at ease with semantic surrealism,
“investing in” translates and
transmutes into “ripping off.”
And market-economy-fed predators = winners.
And the violated,
whatever their innocence, or lack of,
become America’s feared LOSERs.
Another article.
Another investigation.
Another scoop.
Another group of people with names, lives, Identities and aspirations
transmuted into numbers in a culture fixated on innumeracy!
Another page to turn; story to read.
Another opportunity to choose to BEcome willfully blind.
Willfully deaf.
Willfully indifferent to...
Willfully ignorant about...
Willfully SILENT when the energies and powers of outrage are called for!
THEY are only “cabbies! And mostly foreigners to boot.
5
Well, yeah. New York has always had it in for Chicago.
1
Did the author interview any cab drivers who said “the price was too high, so I didn’t buy a medallion” or one that said “I had been driving my whole life and sold my medallion when the price was high.” This is a “victim of the week” story.
6
The issue with medallions in both New York and Chicago is one of obvious corruption. Imagine selling portable liquor licenses or business licenses, valid anywhere in the city, to someone who could then resell that license to the highest bidder. The outcome would be that only the very wealthy would be able to own a business, and the cost of licenses would go through the roof.
The only possibly way the medallion system could be designed the way it was is a) by idiots, or b) by people who are making A LOT of money from it.
This article spends a lot of time talking about all the houses Mr. Levin -- an investor who used the system precisely as it was designed to be used -- bought with his dirty money. Why doesn't it look at the houses bought by those public officials who orchestrated the whole corrupt system?
3
Ye of little faith! These grifters are as gods! They should be extolled if not worshiped for they serve at the altar of the Reagan Restoration. Repent from your misguided regulatory ways and reckless faith in good government. That is heresy!
2
@Rocky Rahm Emanuel, former mayor of Chicago, played a huge part in changing Chicago's laws regarding ride-hailing services, primarily because his brother Ari, an agent, was a huge investor in Uber early in its formation. Rahm is not only a Democrat, he was Barack Obama's former chief of staff. Don't blame this debacle on Reagan, pal. No red or blue here. Only green, and lots of it.
1
Most people understand that taxi medallions are the stupidest regulatory scheme in the history of regulatory schemes. And yet many here seems to blame the rational actors who legally profited from this terrible, unjust regulatory intrusion.
It should not require a million dollar investment to drive a taxi. That turns drivers into serfs, and fleet owners into feudal lords.
8
Question: At what interest rate would you be willing to lend $500k of your money to a cab driver who makes $20k a year, that loan collateralized only by a taxi medallion the future value of which was plainly at risk from Uber? When he later defaulted and you were forced to repossess the medallion that is now nearly worthless, would you cackle with glee about how you really robbed that little guy? Or would you wish you had your $500k back?
2
I have not yet read a comment that is critical of the drivers who mortgaged their futures to make a speculative investment. If the cost of a medallion rose 1,000 percent over a ten year period only a dummy would jump into the market at the peak. As the saying goes if you are at the poker table and do not know who the sucker at the table is, it is you. No one forced anyone to buy these medallions. Put on your big boy pants and take responsibility for your decisions.
4
Ah yes; The shady immigrant fleeces the honest hard working immigrant.
But most Americans could care less;
Are things that much better in the U.S. than their native countries? Still?
1
Some smart people bought medallions; they were competing with each other and drove up the price. Some stupid people bought some of the high priced medallions, thinking that the price would always go up. Then the smart people saw Uber and Lyft on the horizon and sold their medallions. The stupid people did not sell. What is nefarious about any of this? I’m sorry, but not everybody is a good investor. “A man has to know his limitations.”
4
What are the names of these criminals? They must be exposed.
5
Disgusting behavior. Even more disgusting are some of the comments coming in justifying this patent malfeasance. I salute the NY Times for turning this rock over and exposing these insects to the light of day.
9
@Brodston Anyone who was paying even minimal attention in Chicagoland has been aware of this for a number of years. When the iron-fisted Rahm Emanuel was running the show and calling the shots, protecting the cab drivers from financial exploitation was the last thing he was interested in doing.
1
A simple story of greed. The smart greedy people outfoxed the not so smart greedy people.
1
How many immigrants got rich flipping those medallions. Plenty, both here in NYC and in Chicago.
4
Sounds like Mayor Rahm in Chicago was asleep at the wheel, so to speak.
9
@Mike C. Good lord, no! He profited from it, and handsomely. Observe:
https://www.commdiginews.com/business-2/ari-emanuels-billion-dollar-uber-payday-and-what-it-means-for-rahm-24532/
1
gee! you mean the government regulated the supply and prices of taxis/fares...and this led to economic disaster???? im shocked. i mean, rent control works GREAT!!!! i would think it would work just as well with taxis.
let's hope the government regulates supply and prices of EVERYTHING, so we can save money and get better quality!!
1
The headline should read, an inept government bureaucracy taken advantage of by taxi cab entrepreneurs
2
It’s called the “Pump and Dump”..
5
Connect the dots:
Simon/Symon Garber Faux Polo player/Taxi scammer/Ukraine origin
Michael Cohen/Taxi scammer/Ukraine origin
Donald Trump/Scammer in multiple categories
All adds up to nefarious business interests and Ukraine.
Bringing corruption to Ukraine to allegedly
Clean up corruption in Ukraine.
Do they have any bridges for sale in Ukraine?
3
Thank god for Uber; the taxi industry deserved to die off.
3
I hope your comment is sarcasm. I’ll take a bunch of environmentally friendly Priuses on our streets over gas guzzling emissions spewing Crown Vics any day. Just shows why the taxi cab business is obsolete — and just doesn’t get it.
3
There’s a sucker born every minute.
In principle, we should have laws that make it harder for suckers to get fleeced. In practice, people in government are sometimes in on the fleecing.
2
There’s no crime in buying low and selling high. It’s possible that cabbies were like frothy home buyers in 2007. The same big NY cab companies have taken a hit on medallion prices same as the little guys. If they somehow colluded to manipulate prices rather than just being bonafide buyers and sellers at auction, or if price collapse was because of similar manipulation rather than a little thing called Uber, them let’s hear exactly how that happened.
Just like with starry-eyed home buyers in 2007, it’s more fun to frame them as victims rather than people who took market risk and got an unfortunate outcome
1
@Robt Little There's a big difference between taking a market risk and being manipulated by savvy shysters.
1
When I read that the Ukrainian guy who ends up becoming a multi-millionaire monopoly taxi medallion owner happened to have met the Chicago mayor in Moscow 'while on holiday' - whaddya know, as they say in NY!
So - ask Putin to investigate! Isn't that the way it is now?
5
"New Yorker" ... is a code. For immigrants from Russia.
1
First, Capone rides in from NY and takes over the Chicago booze trade, now this!
2
Remember the name Michael Cohen? You know, Trump’s “fixer” and personal lawyer. He was certainly one of the rip-off artists in NYC and may have had a lot to do in other cities’ plights.
Trump only associates with “the best people” - like all those in prison already or on their way. YOUR fake president and his criminal associates and thugs.
5
This is such a non story. Prices go up and prices go down.
RE: Mr. Garber did not respond to repeated requests for comment, including a detailed letter outlining this article’s findings.
The NYT is making money off this article. But they expect Garber to contribute to it for free? The should have paid Garber if they wanted his input.
1
Stories likes this is why I buy The New York Times.
2
America has truly become a grifters paradise where conning others is considered righteous and respectable.
5
We should be looking for corruption in USA not Ukraine.
Another bad idea imported from New York
Please leave us alone
1
What does it matter that they were New Yorkers?? Is the NYT looking to sow inter-city strife? How is it germane what U.S. city they were from?
4
Do not tell me that NYC crooks are smarter than Chicago crooks. Get outa here!
2
The repeated derogatory use of 'New Yorker' reads like the NY Post, not the Times.
5
Can someone explain to me how these immigrant's managed to enter the US and as cab drivers no less? “They used us to get rich,” said Demetrios Manolitsis, 52, a Chicago cabdriver from Greece. It was explained to me by US immigration that I would not qualify to work in the US as a flight attendant because that job could be filled by a US citizen. How did they all do it? Surely there must be enough US citizens who could or would drive a cab? Am I missing something?
3
@S Sm Apparently not many US citizens want to drive cabs and prefer the Lyft and Uber platforms.
This is shocking. How can we prevent such sneakiness in the future?
2
@Ruth Stevens
You can't.
Basically this is a legal business. This story itself creating a problem but when you put under microscope , there is nothing.
It is played out it self 4-5 years span a scheme.
Main target is Greed. 50K Chicago medallion goes up 400K. Greed came out from most domicile person.
At the end somebody pay all price , nothing learned for long term. In another item, in another time period, somebody will pull same scheme again.
1
@Ruth Stevens
How to prevent this in the future? Simple. Stop restricting the number of medallions. This leads to medallion owners having a legal monopoly in the taxi industry. Other cities, such as Washington DC, have never restricted the number of taxicabs, and thus suffered no bubble in medallion prices.
In addition to the drivers, it is the taxi-hailing customers who paid the price of this legal monopoly. For years they had to deal with an artificially low supply of cabs and poor customer service. Fortunately, Uber and Lyft shook up the market when they entered..
1
This whole situation is ridiculous.
First of all, that cities have allowed medallions to become an asset that grows in value over time. Driving a cab should just require you to pay a yearly fee to the city, with last years cabbies holding priority.
However, cities do it because selling the right to drive a cab in perpetuity raises the most short term money, and our cities are always thinking short term.
Then you have the completely uneducated people who think that they're going to strike it rich by super leveraging themselves on a financial product whose value "only goes up".
Then of course, you have the people who manipulated the market. However, what's interesting is while a few made money, many also lost money, speaking to the short term priorities of many people who work for finance companies (big bonuses don't have to be returned if your investments go belly up 3 years later).
People: don't get involved in a get rich quick scheme. Also: understand the priorities of the elite that runs this country, the people who work extremely hard and competitively, and assume that this justifies fleecing everyone else.
4
I love Chicago, but Chicagoans have a complex vis--vis New York. Here the capitalists took them to the cleaners.
1
Just speculative investment tools that have not yet panned out (and may never).
Hard lessons to learn, but they are no victims.
2
No evidence to suggest it wasn’t Uber that did them in.
1
Pump and dump.
They found it worked in the NY medallion market and expanded to Chicago.
2
The cab drivers should get together, hire a good bankruptcy lawyer team, preserve the assets they can, and let the rest go. Whomever they borrowed from can afford the loss; the cabbies cannot.
5
@Katrin
Which law allows that solution?
New technology brings winners and losers. Truth is the reason the bottom dropped out is because of a technological change. If Uber has not come around, those cab companies would be sitting pretty with their investments. Imagine the guy who bet big on Uber; now imagine it wasn’t a big hit.
Welcome to capitalism 101.
2
Hallelujah. Bad outcomes are not evidence of injustice
Did we expect anything better from a city, New York, that gave us Trump and investment bankers?
10
Blood money: "Since 2000, records show, the city has made more than $70 million by auctioning medallions and collecting taxes on private sales."
6
See, the private equity model doesn't have to be limited to corporations! When will brave new pioneers of investment extend this model to the Metropolitan Opera and the MacArthur Foundation? After all, why shouldn't it require a medallion to sing the lead in La Traviata or to get a genius grant?
5
Private equity didn't invent the idiotic medallion system. Democratic city government's came up with that to buy support from taxi companies and drivers.
Uber and Lyft have done us all a favor by busting taxi monopolies nationwide while offering a superior product at lower cost. When one purchases an asset such as a taxi medallion whose value is entirely based on rent seeking and sweetheart big government regulation, they should not be completely shocked when the gravy train ends and the artificially inflated value of the asset collapses. Anyone underwater with a worthless medallion should just default and let their lender take the financial hit. Their personal credit will recover eventually, and in the current environment i don’t see medallion values going back up anytime soon.
17
As a trusting, occasional taxi-needing, senior citizen, I find this article has prompted the phrase, "Vulture Capitalism" to come to my mind. It gives me no pleasure to wonder if this taxi article is about my increasingly-imagined, two types of citizens:
1. Those who want TO EARN A LIVING, ........and,........
2. Those who want TO MAKE MONEY.
I click this "comment" with a sort of sad-despair about our country's current governmental and cultural, economic realities.
37
I hope that the market manipulators committed prosecutable offenses. I hope that any lenders who engaged in predatory lending practices committed prosecutable offenses too.
I hope for a multi-state case against market manipulators and predatory lenders in the taxi industry, so that their profits can be disgorged to the people who believed there was a "free market" at work.
19
@NR The market manipulators are the public officials who created artificial shortages in the number of available medallions. If the number of medallions had not been limited none of this could have happened.
10
@NR Let the market manipulators be branded with medallions and said branding will limit their modes of transportation to public mass transportation, walking or riding a bicycle. These branded individuals will be the soul source of funds for construction and maintenance of bike lanes. No rickshaws, no scooters and no sled dogs. We are just using the wrong currency to deal with these critters. No airplanes ever again. If they use an ambulance, they need the hospital to validate their ticket. We need to make health care available.
1
@Joel
This is the correct response Joel.
I you readers like the effects of a limited number of cab medallions in Chicago, look up Chicago liquor licenses. That's also an artificially limited market, which drives the value of a liquor license to a million dollars or more and also drives the thriving BYOB culture in Chicago restaurants.
Now that I live in Portland, all you need for a liquor license here is basically a pulse, a clean criminal record, and a full menu. Chicago has a speculative market where none need exist.
9
So they bought from greedy brokers because they were greedy to make more money than they could make driving a cab - greed all around. Hard to see how anyone was "taken advantage of" in this situation. Taxis in every American city, for decades, refused to make their services easier or more comfortable for the rider - NYC cabbies, for example, only began taking credit cards in 2007 despite a huge demand for it, San Francisco cabbies refused to use a combined dispatch system so the customers could call a single number, instead you had to call 2-3 different companies and most of the time they didn't show up. Their insularity and monopolistic practices, combined with their greed, led to their downfall.
11
That’s a rather presumptuous viewpoint: Nobody becomes a cab driver expecting to strike it rich.
People did expect a measure of stability as a stable if low-paying line of work. It’s one of the springboard professions for immigrants and others who can’t otherwise find work.
Certain individuals preyed on the vulnerable and the rest of us are stuck cleaning up the pieces.
9
We all know how this country works and what it values. I would be shocked to read that some hadn’t done this.
3
Corruption? In Chicago! I'm shocked! Shocked!
Bottom line: when a city as notorious as Chicago makes up a civic monopoly, nothing good will follow. The expose assumes that medallions are a sort of fact of life, like air or water: they aren't. Ever wonder why there was no subway line to O'Hare Airport for ages? A city councilman owned the bus company taking travelers out to what Dick Daley used to call "O'Hara."
Uber takes lot of shots in these pages--but one can only thank that company for blowing up the deeply corrupt taxi business--in Chicago or anywhere else.
14
@richard cheverton As a Milwaukeean I resent you making me comment.
Coasties were villains here.
1
@richard cheverton
Yes, Except the "little people" are paying the price, and the guilty walk away rich.
1
Three lessons (at least) can be gained from this story. One, the government shouldn't be in the business of creating artificial scarcity, with only a handful of exceptions such as short-term patents to spur innovation. Once a background check is passed, anyone who can pass an appropriate driving test should be allowed to transport others for hire. Second, people are gullible and want to get rich quick. Just because the price of something is going up, doesn't mean it will keep going up. There was an economic value to having a monopoly right to drive a taxi cab in Chicago or elsewhere. Probably wouldn't take too much financial genius to put the relevant variables in a spreadsheet and calculate a net present value of the expected cash flows. Once the market price exceeded that estimated NPV, only a fool would buy a taxi medallion in the hope of selling to a bigger fool. Lastly, there is a concept in economics called "creative destruction". Markets constantly evolve and the profit motive eventually drives excess profits to zero unless there are permanent barriers to entry or zero substitutes. Taxi medallions had value until the advent of Uber or Lyft. Just because greedy speculators couldn't peer around the corner doesn't mean the rest of society should make them whole. Speculation is risky; don't do it unless you can afford to lose your entire investment and still pay back any debt you incurred in the process. This goes for taxi medallions, houses, or stocks.
11
@Earl W.from student loans to medical bills...seems to be a near ubiquitous behavior of preying on the weak and vulnerable.
2
@Sam
If you don't want to be prey, don't do stupid things. For example, taking out college loans that won't pay for themselves through increased earnings from a marketable degree. Or playing medical roulette by not purchasing health insurance now that it is both accessible and cheap through Obamacare. Being an adult means making informed decisions for yourself and then being held accountable for the outcomes of those choices.
3
I buy shares of stock in companies that may have
no presence in my town. If the market price goes up enough
I sell for a profit.
How is this different from taxi medallions?
3
@Zetelmo one assumes that there has been no "fixing" in the market. Products increase in value and decrease of their own accord as consumers want or don't want. IBM, XEROX and BOEING were once an investors dream of long-term wealth--now, meh. FAKEBOOK and the like are where money goes because of the vast wealth of personal data that is sold.
7
@Zetelmo When you manipulate the prices several times higher with the intention to sell to a unsuspecting party, that is called "pump and dump". It is illegal in the stock markets, it should be illegal when trading medallions too.
15
Is this a serious question? Because the article should answer it for you.
1
Tulips
Railroad stocks
Internet IPOs
Taxi Medallions
Will people ever learn? When an asset is spiraling up in cost and people say the words 'it's a sure thing', run away.
23
@Les Tulip bulbs were the first thing I thought of, too.
2
@Les You missed Bitcoin.
2
A friend told me in the beginning of my American experiment:
The US is no nation, no country. it is a market place.
Catch as catch can.
24
And it remains the most popular destination for aspiring people the world over.
1
Some of the victims, like Mr. Manolitsis, appear to have been buying medallions as investments, speculating much in the same spirit as the New Yorkers who brutally outmaneuvered the Chicagoans.
Some (or many) of the Chicago victims simply wanted to drive a cab as their way to achieve middle class financial security and self-autonomy, and others were attempting to play and win an inherently risky market for big returns, and wound up getting burned. How many cabs can Mr. Manolitis drive, for example? He was playing the same game the New Yorkers played, and got beaten. If he'd succeeded, he'd have made suckers out of more modest investors just out to drive a cab.
Two, or several, categories of "victim" in this matter, not all equally deserving of sympathy.
32
How is this any different from real estate? Out of towners purchase properties, flip them, resell them at inflated prices. This goes on and on until the market tanks, and the last buyer now has a worthless property that they can't sell even at a loss. It stinks, but that's the risk you take with any kind of investment. I feel badly for the guy that bought 15 medallions, but he has to accept that this was his decision: "New Yorkers in Chicago convinced him to borrow money to buy 15 more medallions at the height of the bubble" Did they put a gun to his head? Threaten his family if he didn't buy 15 medallions?
9
@Anjou its "different" because the number of real estate properties available for purchase is not arbitrary capped, the properties are not all sold at auction at the same time, and the medallions are all identical (unlike properties that are inherently unique).
11
@Ray
So? How does that change anything?
@Ray Yes, but this doesn't change the fact that a man bought 15 medallions hoping to turn a profit. That's too risky unless you're a gazillionaire
I take taxis in Chicago. The whole idea of medallions is a scam and should be abolished. The city should pay drivers what they paid and end them. Then we would still have taxis that could compete with Uber and Lyft, which don't have to have medallions.
19
@dr. c.c. I visit Chicago regularly. I usually take an Uber, since I can call them as the plane is coming in, and they're there when I walk out the door.
I tried a taxi instead a few months ago. The driver didn't speak enough English to understand me, and I couldn't understand his accent. He didn't know where he was going, got lost on the way to pick me up, and got lost en route.
At the end, the fare was more than twice I'd have paid with Uber, and the car wasn't even nice.
Same thing all over nowadays: forget about taking taxis. It's just old tech. It's a shame, because taxis could, and should, be the way to go.
But they're irrelevant now, as much as paper newspapers and landlines.
8
@Jack Lee , the problem there is the taxi driver license is too easy to get. As far has paying far less than an Uber for a licensed taxi, Uber drivers don't make enough to live on because Uber loads most expenses on to the driver.
I use medallion cabs 95 percent of the time. And 95 percent of the time the drivers are excellent. I occasionally use Uber, and have had a couple of really bad drivers.
6
@Jack Lee At least with taxis you are less likely to be raped by your driver, no one tracks what you read in paper newspapers and the acoustics are much better on land lines and you are never "dropped" - just saying....
1
Perhaps the fault lies with our media for not focusing on issues that matter to people, until it is too late.
13
@Len319 well this issue matters to taxi drivers, and those who want to BE taxi drivers. In short, "not my problem"....
@len319
Exactly!!!
But you can’t make snappy headlines or make people pay for 3 or 5 discrete columns of opinion that dissect what really matters to people.
What really matters doesn’t sell papers
One word... Uber.
Sometimes I think the entire anti Uber thing is just Big Taxi protecting their exploitative and obsolete business model, and cities protecting their exploitative taxi medallion tax money.
Uber is just so much better. No more half the taxis driver not taking credit card. GPS. No more racist drivers not picking up a fare.
If only taxi drivers could make a real living and got benefits. But other than that, Uber for the win.
9
@Dundeemundee Uber cheats its drivers out of a fair share of the company's massive earnings; Uber drivers are suburbanites with no familiarity of city routes (GPS is inaccurate far too often); Uber has seen shocking criminal activity; the massive influx of Uber drivers are creating gridlock in many downtown areas. The taxi industry might have imploded itself, but Uber is the pits.
1
"Everybody kind of missed it," said policy advisor to former Mayor R. Emanuel.... I doubt that the mayor or his advisor missed it. Sounds like another racket to me. Or a legal capitalism style of racket. Like those where privatization of national property at rock bottom prices (Argentina, Russia) led to scandalous (but "legal") deals. This one is somewhat different, but it is not unfamiliar, it rings bells.
7
@tdb Everybody missed it? Not everyone! Some 2400 years ago in Plato's Republic (book VIII) Socrates explains that in an oligarchy, i.e., a society where the rulers place the highest value on wealth and the accumulation of wealth (sound familiar?), those in charge will be so obsessed with accumulating wealth that they will lend to those who cannot afford to pay back the loans. Then, when the defaults occur, the wealthy take the property of the borrowers (sound familiar?) and poverty is multiplied (sound familiar?). Eventually, the poor become so numerous that they take charge of society by overwhelming the oligarchs. Is that where we are going? But the poor will be unable to govern themselves and so a tyrant will find easy pickings.
24
@tdb Being Chicago if is almost a certainty there were big kickbacks.
1
@Gary Marton .... when the poor have nothing left to eat, they will eat the rich.
Corruption, greed, devious manipulation of the underdogs and the ill/uninformed.....a sad but all too often reasons for unchecked scenarios uniquely outlined throughout this article.
6
Surprise! It turns out that for profit monopolies lead to exploitation of workers and consumers and aren't actually humane and kind! Woah! Who could have seen that coming? It's almost like the medallion system is a bad idea and infusing it with human greed is a recipe for outrageous prices...
9
An important but largely toothless article, since it names none of the alleged culprits. Who were these evil "New Yorkers" - these "taxi industry leaders — fleet owners, brokers and financiers — [who] steadily seized control of Chicago’s medallion market and squeezed it for huge profits?" And isn't this just another story about "the American way?"
3
@Charles Michener Did you read the article?! Did you gloss over the 10 or so paragraphs that referred to Michael Levine? Do you think New Yorkers (or ANYONE) are going to put their hands up and willingly take credit for creating the inflated market that bankrupted immigrants?!
And I thought "The American Way" was in part immigrants coming to this country and prospering?! But maybe that was the lie all along.
1
Sounds a lot of capitalism going on. Amazing.
4
@August West capitalism does not depend on restricted markets
6
@Ray Vulture capitalism does. Best scam gigs going are those with cartels that have a guaranteed government funding stream, like healthcare and education, or markets like this one partially limited by government regulation to create an restricted number of players thus artificially perverting supply and demand, but not actually monitored and governed by counterpart comprehensive regulation.
Who's surprised by this, given these players and these governments? The sharpies laugh all the way to the bank (or the Hamptons), the phony, lax government gets its cut, and the suckers are left holding the bag. Pump and dump, baby!
1
The Chicago guy who bought 15 medallions to speculate is complaining about the speculators??
11
My heart isn't bleeding for any of that... Over regulated market of taxi medallions brought unsavory characters who drove up prices on limited supply... All thanks to municipal Gov't regulation greed won the day back then. Services of NYC or Chicago cabbies was also a tale of sorry ars rider begging driver of foreign descent to close his window and turn AC lower on way to JFK in 10% humidity and 100F weather only to have the driver ignore him or say something completely incoherent in 3 different languages... a classic... :))
Now real competition with Lyft & Uber making market place more competitive if not necessarily even cheaper but at least client oriented with clean cars well air conditioned and friendly! So, yeah deregulation and market forces win it for the ultimate - the rider... :))
5
@Jack Lyft and Uber are a win for everyone...except the underpaid people with no benefits who drive for Lyft and Uber.
2
@Jack Chicago regulations require that all cabs have working a/c and heat
1
I'm just disgusted. This is why people need functional govt. because the average hard working american is LITERALLY prey for greedy capitalists.When you talk about "what the market will bear" we are not talking about rampant corruption. Clearly these ongoing Trumpianesque corruption and con-schemes are unbearable...I guess these men just have to "pull themselves up by their bootstraps" unless govt bails them out....Ha! unlikely.
THey'd have to be big banks for that to happen.
9
@Lourdes when you buy anything you need to understand it’s risks. Plenty of people have passed on good and bad investments because they don’t feel comfortable with the risk.
3
Typical of our economic system. The rich victimize those poorer than themselves.
3
Let’s stop calling them New Yorkers please. These are New York-based businesses, calling them New Yorkers paints the good working people of this city with the same brush used for thieving businesses and corporations.
8
To me, this is "legal" conspiracy to commit fraud.
7
@Sasha It's the American Way in the Reagan Restoration!
The fault lies in the consumer, as is typically the case. Someone who invests their life's savings and takes out loans that would set them up as a landlord, to buy a medallion at a price that makes no sense at all except that the next 'get rich quick' buyer will make them a profit, is a mark. The people who got taken were not trying to establish themselves as owner operators but only trying to 'get rich quick'. They missed the boat. There will be another one along. There's one born every minute.
3
In San Francisco the situation was a bit diiferent. Taxi medallions were not trAnsferable until 2012-3 when the city instituted a program whereby drivers on a list
Were entitled to buy a medallion for $250,000 of which 50,000 went to the city. Sellers were mostly
Driver-owners over 60 as the ordinance provided
That age limit for the right to sell. At the same time
the city promoted Uber and Lyft with the late mayor
Lee declaring a “Lyft” day. Soon foreclosures followed
Impacting the Credit Union who in turn sued the city.
The city tried to alleviate the purchasers plight by preventing older owners from picking up at the airport thereby making their medallions unleasable.
This is an example of the city creating a fire and dousing it with gasoline to put it out.
6
If I were writing this, I would have replaced "New Yorkers" with "New York corporations." That little change would have placed the responsibility for this debacle where it belongs.
21
@Richuz I would say scam artists, which would include some corporations.
1
I read about the inflated prices in NYC years ago. As a business person, it never made sense. The cost of a license to operate a taxi should be easy to calculate. You can estimate the amount of fares/revenue and the number of hours you work - plenty of data. You can estimate your related costs - also plenty of data. Then discount the future NET income stream to the present value at a modest rate. For example: $40,000 net earned per year, 10 years, 8% and the value of the medallion is about $268,000 BUT that is just BREAKEVEN.
It seems like it would be tough to make a really big net income driving a cab, because operating expenses would be relative high, in a city where the cost of living is high. Also, what could a driver make in a different job, and not have to work 12 hours? I can't take the time to do all the research but my gut tells me this is not a great career. I won't even add the 30%+ drop in revenue since Uber/Lyft!
5
This is a good reason not to take an econ class which leaves you with an infantile incorrect view of how society operates.
1. Free Markets... to think the auction of medallions represents a free market is nuts. That's why economists seldom define a free market and why crooks in society call things free markets - so they can hide from someone else's ignorance.
2. Free markets involve many suppliers and many buyers with a constant influx of product to be sold and buyers consuming goods. Medallions have limited supply - not a free market.
3. Economist adore ownership. They teach society that only through ownership will markets be efficient. Well, funny it didn't work that way with owning a medallion but economists will never tell you this.
4. A permit to operate a taxi should never be something that is owned. Yeah the city thinks it is cool that the auction brings in tons of revenue but that is only once. It is more appropriate for a medallion to be a permit that is paid for on an annual basis. The number of medallions should be tied to the demand for taxi transit - including uber and lyft as they should be required to have an identical permit. A permit user must show the permit is being used or it will be revoked.
Dump Econ - teach financial literacy instead.
59
Mike- I like your feedback. Can you give me any good books you have read lately on this theory?- ( please understand I am not being sarcastic) - I always like to get reading ideas from people who have present good ideas
@Mike ryan
Great post. Well thought out with solid solutions.
1
The government and corporate actors should be fined + the predatory loans voided (minus a reasonable fee). Cabbies who already suffered + paid back should get cash back. And please: no 5-year law suites that cost millions of tax payer money + goes to lawyers.
Keep it simple and fair. (The same goes for NYC cabbies)
5
@msf Many of the loans went bad. Meaning the banks lost their money. They lost too. It’s called risk.
1
@Bk2 quite callous, I think: There is a big difference if a national bank loses a few hundred k (peanuts) or a private citizen for whom it is the whole existence.
2
@Bk2 banks retained ownership of the medallions, which they could then resell to another person, along the same absurd loan terms
1
Back when I first heard the news that a NYC medallion crossed $1 million mark before I knew Uber/Lyft existed, even plebeian like me knew the price made no economic sense and things will eventually end badly. Then a year or 2 later when I started using Uber myself, I sensed the whole medallion pricing had to be some sort of pump/dump scheme orchestrated most likely by the few fleet-medallions insiders/owners unloading to their immigrants employees/drivers with a pitch of being their own boss.
Of course just like in NYC, Chicago admins/regulators were paid to look the other way.
18
Why do medallions exist in the first place, as opposed to some kind of licensing to ensure safe drivers?
39
@Emily Because in the 1930’s there were more taxis than passengers, causing drivers to work longer hours for less money, resulting in violent protests by drivers who demanded increased regulation. The result was the Haas Act which established the medallion system which allowed for the capping of the supply of taxis so that it did not outstrip demand.
9
@Dale which ALSO allowed the city to regulate the quality/safety of the vehicles being used
2
Great article! I live in Chicago (since the 70's) and had no idea this was going on. I'm not surprised that city regulators here were consumed and guided by the desire to bring in revenue, at any cost to the riders and operators they were supposed to be protecting. That's how we got our parking meter deal, sold the Skyway and ended up with a special tax district for every developer project, at the expense of balancing the budget or paying for our overwhelming pension debts. This is all indeed legal, and part of a free market, but it's toxic capitalism and its attendant legal corruption at its most flagrant.
32
So should immigrants not be allowed to take out loans? Should banks not even be allowed to lend money? Businesses win and lose and there is risk. What’s the alternative?
11
@Bk2 regulating the "usury" rates OF such loans, similar to what we do with credit cards.
Note that Democrats often propose/support such regulations, while Republicans always oppose them
3
@Ray Do you realize that many of these loans went bad and that it was the lender that lost most of the money?
1
so much for the joys of de-regulation.
10
This is the precise opposite of deregulation. These are government medallions.
11
@Walsh Regulation requested by the industry, forming a cartel. Without attendant oversight to keep things on the up and up. But, then, keeping things on the up and up is anathema in the Reagan Restoration era.
4
This is basically the taxi equivalent of a pump and dump scheme, typically seen in the stock market executed by boiler room brokers and/or organized crime syndicates.
What should be made clearer is that this was a pure transfer of wealth from drivers and lenders to these outside investors, as the investors not only sold but lent money, and in turn sold the loans, minus exorbitant fees, to long-term lenders.
There are two ways to do business. One is where both sides benefit and look forward to a long-term relationship. The other is where one side rips the other's face off. You should always ask which one you're about to embark upon, especially if there's a significant wealth/information gap.
52
@George Peng It takes two to complete a sale. Buyer beware!
2
@George Peng. Well said. Just because something is legal, doesn't make it ethical or just. The millions of dollars that the manipulators made isn't Monopoly money or a winning score. It is real dollars swept out of the incomes of actual people putting in the hours and hours and hours of real work. Shame!
8
@George Peng "the other is where one side rips the other's face off" -- so good!
Doesn’t the same thing go on with land value?
Henry George, Progress and Poverty (1879). Still true.
There is a remedy.
5
Plenty of people held million $$ seats at the Chicago Commodity exchange and they have lost almost all their value due to digital trading. This is really about Uber, Lyft and the fact that most investments have a good and bad price to pay. Also, it seems like one of the biggest losers will be the banks who gave the loans. Are we crying for them too?
7
@Bk2 The Exchange is a private entity
"Then, they pumped up medallion prices"
How? With a tire air hose? I remember I tried to pump up the price of the last house I sold. It didn't work as nobody bought it, so I had to deflate the price.
I'm sure there were a lot of people who had just built or invested in typewriter factories just before Microsoft Word was first released. I know the NY City Counsel tried for years to prop up the "little guys" running the typewriter repair shops.
The NY Taxi Cab industry was dying long before Uber owing to the dated and utterly corrupt system.Today, real New Yorker's just shake their heads in stultification when they see someone riding in a Yellow cab: who are those people, they wonder.
21
@Glenn As one of the experts interviewed in the article mentioned, this is wash trading plain and simple.
The large players were buying and selling medallions to one another at inflated prices in an attempt to misrepresent the asset's actual value.
No air hose required
20
@Glenn great point. Pumped up!! And were the buyers forced to buy at any price?
1
@Glenn
Exactly!
I would have appreciate a little on the Chicago suburban taxi situation which to my untutored eye looks to be in pretty good shape.
2
@Sausca
Nope. Uber. Lyft.
2
What a shame that this beautifully written story was no surprise. The old Dutch tulip market, South Sea bubble and Darien scheme came to mind.
It was, and still is, capitalism as it actually works on a regular basis. And ultimately ordinary, probably decent, working people end up paying the most significant price.
I was also reminded of Oscar Wilde's line about the cynic knowing the price of everything but the value of nothing.
9
@Fred Humble Taxi medallions are the exact opposite of capitalism. They are a governmental quota mechanism that puts an artificial limit on the supply in the taxi/ride market.
12
@Kohl
Which the acquires a monetary value - more grist to the mill.
To the immigrants, welcome to the New USA. We have been a capitalistic society ,but in the last 25 years we have become a capitalistic greedy society. Moral out the window. We had tons of rules to tame down the greed or at least control it. After Reagan anything goes. He opened the flood to the space we find our selves now. Humans need boundaries. It is a moral compass. Once those boundaries are lifted, anything goes. The cretins come out of the woodwork and start the slaughter of millions to financial ruin. This people are just the trash that ruins life for the rest of us. It makes the USA look bad, the rest of America are pretty decent folks. We need good new boundaries. Strong one so like that Corporations and other don't get ideas that they can clean the floors with the American people.
34
@DD
Exploitation of the vulnerable is one of the lynchpins of capitalism. The first settlers to America exploited, abused and eliminated the indigenous population and history has proceeded apace since then. Whole continents' histories are sagas of rapacious exploitation.
Unfettered capitalism is a malignant tumor on the social body politic.
6
@DD Oh please - this is greed around the board, including on the part of the immigrant drivers. They got greedy and overextended themselves thinking they were going to make a killing and also hold an asset that was only going to go up, up, up in value. The fact that they guessed wrong (and were naive to do so) doesn't impart pure motives to them.
The culprit is the medallion and cab system entirely. The industry failed to regulate bad actors and to deliver real value to consumers and once their monopoly got broken up they got burned for discriminating against customers and ripping off customers and frankly violating city regulations in every city they operated in by refusing to drive to certain places, refusing rides to certain races, and refusing to take credit cards.
Let the cab industry die! It was inherently devoid of accountability as a monopoly.
3
@Jon P
The real "culprit" is an economic ethos that idolizes a "winner take all, zero-sum game" system.
This is absolutely sickening greed. It's as low and as cruel as people can be. Just a business opportunity! Is it "uncivil" by the Times' standards to declare my abhorrence of such rampant and uncaring exploitation of human beings for material gain? Shame on these New Yorkers and their partners in what should be called a crime.
8
@jojo this was a business decision that had risk. Explain the “crime”.
2
@Bk2 Did you notice I stated that it "should" be called a crime? Whose business decision had a risk? The greedy people with money to burn while burning the investments of others who were looking to make a relatively modest living? There should be laws against intemperate business deals that are designed from the beginning to take down others - most egregiously to destroy those who have no capability of protecting themselves against the "risk" of such greed.
I tell my trump voting acquaintances all the time that to understand trump you need to have lived in NYC especially in the 70s and maybe the 80s. now I read this..... some things never change. it also helps to know that Michael Cohen was one of these profiteers. disgusting.
11
How the heck does a guy making 20,000 a year get a loan for 400,000 ??
Replace the word "medallion" with "gold" and it makes more sense.
9
@wallace
Funny you should mention it. The slogan in the taxi medallion industry was "better than gold".
Now we see that, due to the advent of superceding services like Uber and Lyft, a more apt slogan might be "not as good as garbage".
1
Cabbies in Illinois should move to California and New York where the laws protect them.
6
Evgeny Freidman, who was in the taxi business along side Michael Cohen, got a plea deal so that Cohen could be investigated. His scheme was simple, buy every medallion as they come up for auction, then turn around and ask a lender to lend him money for the medallion purchases, telling the lender the market price was the auction price. The lenders, who were fairly stupid, did not research why the prices were so high. He lectured about his scheme to the Yeshiva University business students, his law school alma mater, https://youtu.be/LSvNGsL-iig
15
Uber and Lyft are skirting Pennsylvania laws by using cars with New York license plates as they continue to try to ruin our taxi services, at least some of whom are surviving, but we may be down to only two surviving providers of taxi service.
8
@Grittenhouse Talk to most UBER drivers . They appear to hate their current indentured servitude .
1
There's one lesson that ought to be taken from this sad story. Any regulation scheme that limits the number of permits to an arbitrary number needs to watch market signals -- i.e. prices -- and ensure that things don't get out of hand.
To prevent hyperinflation, all the agencies had to do was have a policy of issuing additional medallions any time prices spiked by more than the rate of inflation. If necessary they could flood the market with medallions and take the air out of the balloon -- and then buy them back if prices got too low. But it never would have happened. Simply having the policy language in place would have kept the speculators out.
It's academic in this case because the medallion taxi scheme is dying a well deserved death. But this thinking needs to be applied to other industries where speculation can drive up permit costs -- such as liquor licenses.
165
@Tom B. I really appreciate your thinking on this. However your thesis is premised on the idea that government serves primarily to protect people, and not to increase its own revenues. While I also want this to be true, in hundreds of practices it is very plain that municipal and local governments are frequently organized and driven by the latter drive and not the former. Until non-elected powerful officials are insulated from the moneyed and powerful interests who seek to profit off government machinations, it is unlikely that said officials will do the right thing on their own.
10
@Tom B. The government is the problem here. You shouldnt need a 100k or 500k "Medallion" to drive a taxi. Taxi drivers already have a thing called a drivers license. A medallion is just a made up government revenue scheme that distorts free market pricing. Taxi drivers are engaging in a simple service of driving people to a destination. It's like saying a barber needs a $200,000 medallion to be licensed to cut hair. It's insane. It all blows up in the end because government distorts pricing, aka college tuition prices.
13
@Independent,
A medallion isn't a license to drive a taxi. it's a business license to hack up equipment, and provide the service of responding to street hailing. A taxi is made up of a properly hacked and maintained car (with meter, lightsetc), a medallion, and a driver with an appropriate taxi licenses. Municipalities have a civic responsibility to insure that taxis are safe, regularly inspected, operated fairly, have standard equipment, and use the public commons in a economically sustainable way. The problem was not that medallions existed, it was that they were transferable for profit.
20
The author of this piece has been on the case of the medallion owners and their lenders for several months but the real culprits who sent the medallion taxi industry into a tailspin are Uber, Lyft and other such services.
The biggest losers here are apt to be the lenders. When medallion owners can no longer afford to make payments they can file for Chapter 7 Bankruptcy and walk away practically unscathed from their indebtedness. They will lose their medallions, the collateral for the loans, but if they are enamored with the taxi medallion industry they can buy another medallion for a fraction of what the medallions cost previously and still make a nice living.
Their new medallions will be the collateral if they finance them and getting a loan in spite of the bankruptcy should not be a problem because, having gone bankrup, they are now good credit risks since they cannot go bankrupt for another 8 years and their balance sheets will have been wiped clean.
As such, the biggest losers are the lenders who are being demonized herein.
Let us also note that, at least in New York City, most medallions owners are investors and not drivers who rent medallion cabs by the shift, which is 12 hours. As such, medallion owners, as well as their lenders, are the big losers here.
As far as Uber and Lyft go, time marches on. People prefer their business model. When's the last time you hailed a horse and buggy?
7
@MIKEinNYC
Distraction. Obfuscation.
Classic Trumpian strategy.
2
People prefer Uber and Lyft business model ? Have you seen their stock prices since their respective iPos ? They are losing a half a dollar on every dollar they are taking in. I know, they’ll make it up on volume. Now there’s a classic Pump and Dump.
4
@Pedro Greenberg
The preference for the Uber and Lyft model which I was referring to was as to the customers, not the investors.
Me? I still like to go down to the street and hail a yellow medallion cab.
3
"One New Yorker’s network of companies bought $30 million worth of Chicago medallions and later sold them for $185 million. He purchased eight homes, including a house in one of the most elite neighborhoods in the Hamptons, records show. Another who made millions in both cities opened a polo club near his 10-acre estate in New Jersey."
The name of the people who did this is newsworthy. Why is the paper editing out the news to defend financial malefactors?
How many lives does big finance need to ruin before they are held to public account?
55
@Nathaniel
"The name of the people who did this is newsworthy. Why is the paper editing out the news to defend financial malefactors?"
The NYT is not editing anything out. The people in question are clearly identified by name further down in the article.
4
@Nathaniel, if you read down, the names are there.
2
@Nathaniel It's just an introductory paragraph. The people are named later in the article.
"In 2009, Mr. Garber formed the International Polo Club of Colts Neck near his 10-acre estate in New Jersey. The next year, he purchased a condominium in a lavish building on Warren Street in TriBeCa for $8 million."
"Records show that before the market collapsed in late 2013 and 2014, Mr. Levine’s companies sold most of the Chicago medallions they had bought a few years earlier. The companies paid $30 million to buy 543 medallions between 2006 and 2008. They sold 529 medallions between 2012 and 2014, for a total of $185 million."
2
Can we call them people instead of New Yorkers? We already settled with owning this president. Maybe they all like baseball. Then we can call them baseball enthusiasts.
2
@nadayooski
Own it. Trump is a product of the corruption in NYC. This is not news. It exists in the NYPD, in Board of Ed, in Construction, in City Council's back door deals with developers destroying our cities, in Wall Street, in Banking.
Have you forgotten THREE-TERM Bloomberg? preceded by the fully UNHINGED Guiliani?
The Apple is rotten to the core....always has been.
@nadayooski ha ha I know the feeling, being from FL I get teased all the time about the "pipe bomber" two mass shootings and still no gun control. A crazy state.
Predatory capitalism in action.
6
This is a phenomenally written article. Wow. This is the exact journalism that the Times needs to keep doing. A+++
On another note, as an experienced equity investor, making about 19% compounded returns over 20 years, I can tell you where the next collapse will take place: college loans. The same scenario is playing out in a more sinister way. And the main culprit is always the same, low quality lending standards which cause asset bubbles. No viable bank would ever give a loan to a student. They have no job, no income, and no collateral. They are the worst of the worst candidates. Yet the government backs these loans in the same way Fannie Mae helped create the housing mess. Our markets are suffering royally because family formation is being stifled for a generation. This is why investing in alcohol and tobacco will prove immensely profitable at these valuations now. A vape, drink, or a pack of cigs is about the only thing these kids can afford to relieve their stress.
10
If it looks like the mob, and acts like the mob, then it's probably "well connected venture capitalists". LOL.
6
It's easy to blame unscrupulous individuals, incompetent regulators, or inadequate laws. But those are all just symptoms. The real culprit? Capitalism!
2
Taxi medallions in New York City cost $10 in the very beginning. Look at what has occurred since then, even counting inflation. Back in the 1990's, I had a very good friend in Greenwich Village. We went to the same fitness center (World Gym) by Broadway and Houston Street. I was living in a rent-stabilized apartment in Soho. Although it is a great neighborhood and had super low rent, it was tiny. He and his 2 partners owned 150 taxi medallions. At the time they were worth about $125,000 each. He did very well for himself. I, fell in love and got married. We moved to Flushing, Queens, and haven't seen him since. As someone else wrote, "it is a racket". Truly.
2
Tulips, securities, houses, taxi medallions -- the asset changes, but the pump and dump con remains the same.
5
Evidently a form of 17 Century Dutch Tulip Mania still exists. But surely with Uber and Lyft lurking buying a taxi medallion was very risky especially with high interest loans. The old story of fleecing unsophisticated individuals.
2
The legal question about this matter is does the selling of a cab license, otherwise known as a Medallion, constitute the selling of a commodity. If so, this selling was unregulated and therefore illegal. The sellers were the cities, who unwittingly, became brokers to resellers who had no intention of using them locally.
The other question is, did and really when did, Uber and perhaps Lyft executives or pre-executives, discover that they could muscle in on the collapse of the cab medallion and take over the cab business without any licensure?
4
Buyers (late in the bubble) with buyers remorse. Sellers (early in the bubble) with sellers remorse. Borrowers with borrowers remorse. Everyone betting on a greater fool to come along. All believing that the city government would continue to protect a precarious investment and keep the bubble growing. Well what the good lord giveth (a monopoly) he taketh away (see Uber). Some get very rich speculating, others very poor. Limited sympathy for any of them.
10
The only reason the loans became affordable is due to Uber. Uber is progress. Ride sharing apps are far superior to the old put up your hand and prey a taxi would come by. The cars are cleaner and also actually go out of the city center into minority neighborhoods.
There was no nefarious scheme to bankrupt people. Uber built a better mouse trap and broke the government imposed monopoly. The taxi business failed due to new technology. Similar to the buggy wipe, telephone operator and encyclopedia businesses. Its progress.
5
@Chris
Untrue. The Prius, a car Uber pushes the driver to sell, is NOT a safe car to drive countless passengers in a single day.
Only the sturdy Crown Victoria or other such vehicles are suited for being taxis.
Try being a taxi driver.
6
Crown Vics were great taxis. However, it is a tough business driving them. However, I do think we should limit the number of private cars in Manhattan.
@Chris from LI,
There is no reason the NYC Taxi and Limousine Commission and other major taxi markets could not have incorporated the same “ride share” platform that Uber and Lyft use. In the past many decades ago yellow cabs in NYC would be on “Radio Calls” and be dispatched to a location requested via telephone. That was the technology back then. Again there’s no reason the same digital platform could not be used today. Uber and Lyft also creates excessive congestion and takes billions away from mass transit.
5
I marvel at how some free-marketers out there dismiss the “unsophisticated” investor who loses his/her shirt while glorifying “sophisticated” corporate interests that manipulate markets to their benefit through legislative lobbying to build unfair and insidious barriers to entry that protect the status quo and their cash flow. This happens in every legacy industry be it oil (say no to ethanol), pharma (say no to generics) or beer brewing (say no the craft). These free-marketers don’t see the inconsistency because it fits their paradigm.
17
@Peabody nobody says no to generics. Ethanol is a scam forced on to us by the government, and people love craft beer.
@Peabody
Kudos! Your post says it all.
This is the "subprime crisis on wheels". Who is left holding the bag, well the equity that the little guys put up to get the loans (if any) is wiped out and the banks that lent the money who are now left with near-worthless collateral. The speculators saw a mis-priced market of cheap medallions, clearly understood how to make it look firmer than it was and saw the doom to the whole business from UBER/LYFT. They got out and left the others holding the bag. And just like the 2008 crisis, no one will go to jail because there are too many moving parts and technically nothing criminal done, just crazy greed by everyone involved from the little guy hoping to have his $300K medallion go to a million to the large credit union looking for juicy loans at high rates.
5
@michaelf
Predatory lenders fed drivers expectations with unrealistic projections, feeding their dreams of becoming financially independent and did nothing illegal, unlike the lenders and market manipulators who seem to have committed price manipulation, and possibly bank and lending fraud.
2
And when the drivers can’t repay the predatory lenders, the predatory lenders lose money. It doesn’t seem that predatory lending is a good business model. Just a fancy sounding term for people to get outraged about.
Taxi medallions are a racket, always have been, always will be.
14
The medallion system was always a racket. The government should not be limiting the number of cabs. Under and Lyft models are the best way to go. People can make decisions whether to drive or not based on their needs.
6
@Ed
California Cities such as Berkeley, SF and Sacramento HAVE TO REGULATE the number of cabs on the streets because there IS NO SPACE for them to drive and or but most importantly PARK.
2
I still believe automobiles for the general public should be banned in Manhattan. Only allow them for Taxis and commercial vehicles. The only exceptions besides this are the logival ones: Police, Firemen, and government officials. Anything else will reduce the movement to a complete standstill.
@RR That is not true. If there are too many cab drivers and their wages decrease as a result there will be cab drivers that voluntarily leave the industry. If you are not making any money doing it, you will quit.
This all sounds similar to foreign investors buying up real estate making it too expensive for locals.
12
The only reason any of this was possible was that regulators in New York and Chicago (and, probably, elsewhere) imposed artificial limits on the number of medallions. That protected the taxi industry from competition, but exposed it to the risk of changing medallion values.
Had these cities been willing to issue medallions in the same way states issue license plates (ie., for a minimal fee to anyone who meets some specific standards, e.g., insurance) none of this could have happened.
18
This is a great case study.
In New York, Chicago and Philadelphia, the taxi business was horribly mismanaged by regulators who could see exactly what was happening. They allowed it, encouraged it, because their agencies received a financial windfall from the absurd medallion prices, and maybe because key people in all three cities were bribed.
Even if Uber and Lyft hadn't burst the bubble, taxi service in all three cities was significantly harmed. The speculators extracted their money, and the resulting debt meant no money to buy and maintain cars and lower wages for drivers.
The taxi regulating agencies measured success based on their own financial metrics instead of the health of the market they were supposed to be regulating. Then came Uber and the new paradigm washed it all away.
22
How does a medallion system, often with fleets of cabs under private ownership, benefit the public, especially where there is no competition in price or service? Ideally you start with a professionalized corps of cabbies, as in London. Instead of medallions, City owned and maintained cabs, all the same, centrally housed and serviced, shared by uniformed, licensed cabbies. The current system does nothing to benefit service, as any taxi rider can attest.
12
Yes, London’s black cabs are a great system, but that would never work in America.
Why? Because “It’s Socialism”! In other words, there is no way for a capitalist middleman to make a profit. Such systems are deemed to be “Un-American”.
1
The Chicago taxi business is easier to understand than New York's with fewer characters and a less meteoric rise in prices. So one can find more than taxis here. Unintentionally perhaps, the Times has written one of the best articles on financial market manipulation I have ever read.
Anyone who's watched lightly traded stocks in volatile markets understands "painting the tape." Suppose someone, say a fund manager or a hedgie, owns a million shares of stock.
Say he pays a crazy 20 dollars at the market close for a single share of that stock then trading at only $10. He loses 10 dollars on the trade but adds $10 million to his net worth. An easy way for a big player to make a quarterly bonus target or prevent a margin call.
So yes, paying more for something than its intrinsic worth may not be so crazy at all.
(FWIW, the big medallion buyer who got out early understood the old stock market joke about the guy who thinks he's rich after accumulating a mountain of stock at ever increasing prices. The one with the punch line, "Sell to who?")
Kudos to The Times for the fine reporting and excellent writing here.
Just my opinion.
43
@SpartacusNJ
Smaller but similar is how shills work on ebay. Ebay doesn't care as it gets its cut. Shills are hard to prove unless a pattern (and that could a random event).
Chicago should have never allowed outside sales, and should have prevented this.
Greed. Its here. Its everywhere.
6
@SpartacusNJ His net worth doesn't increase by $10 million unless there are others who will pay $20/sh. for his shares. Who is going to do that?
1
I live in Chicago and I never use a Taxi. It’s either Cars2Go, Lyft or (if desperate) Uber. The last time I used a taxi (Yellow Taxi), my fare was $14 with tip but afterward, I was charged an additional $50 ‘for vomiting in the cab’. Mind you, I was with several other people and non of us vomited. However, the time and effort associated with arguing with the cab company (Yellow Taxi) representative, who barely spoke any English, was so exhausting that I basically gave up. I’m sure the ‘you vomited in my cab’ trick is a NYC import too.
14
This is an example of what happens when there is too much government, not too little. The idea of medallions is a way for government to try to control what the market would control much better.
6
Rham Emanuel, responsible for pivoting a President Obama from a potentially transformative figure to center right, was unaware outsiders were coming in affecting the system? Doubtful.
10
Shades of the 2008 recession and the sub-prime mortgage scandal. Money was lent where it never should have been lent and the rest of us - taxpayers and/or consumers - had to pick up the pieces. Unfettered capitalism sees no problem with this: it's a zero sum game and winners have to have losers. It's difficult to feel sympathy for someone who saw stars in a foolish investment (15 medallions - what did that set him back?) and who did not reap the anticipated harvest of $$$. I don't have the space to list here all the losing stocks I have bought, but I certainly never expected anyone else to pay for them.
5
On a visit in March, I caught a cab at the high line who said he didn’t feel any pressure from the ride hailing companies. Despite the backstories, New York wouldn’t do it for me without the harrowing nail biting taxi cabs.
2
I think the earlier article mentioned that the reason cab drivers could borrow so much money, was goverment guarantees or similar, for the amount. Surely something could be done about that, also retroactively, if not the city administrators and politicians were mixed up?
1
@Jeppe T our government also puts people that want a college education in deep debt...... taxi drivers from foreign countries? not a heavy lift.
The unregulated ridesharing market in Chicago also doomed the cabbies. Rahm and family were investors in the company and stood to make huge profits from gutting the taxi economy in the city, a business where a hardworking driver could support a family of 4 not six years before suddenly became a subsistence job - and they were on the hook for it. When I first moved to Chicago in 2008, every 4th car on the street was a hack cab.
Now you're lucky to see one every half-hour. The Uber and Lyft drivers are everywhere, will stop wherever they please, disregard traffic laws, and most have out of state plates.
Having worked as a part-time bartender as my side hustle for the past 11 years, I came to appreciate the late-night cabbies who would get me home safe and sound and covered in beer at 4am two nights a week. Most of those guys aren't around anymore.
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There should have been a different system in place altogether, which would have prevented the later tragedies.
Medallions should not have been auctioned to the highest bidder in the first place: if it’s a government asset, it could have handled it like any permit, at a set rate and barred the resale of medallions at a profit, only a transfer: this would have removed speculators and profiteering from the system, and prevented the type of inflation that later caused drivers to be underwater in debts.
But as the article notes, the system allowed these cities to make a fortune.
No wonder, by the way, that taxi fares are so high.
Curious as to the licensing process elsewhere, I just checked how it works in, say, France : licenses are free, but restricted (ie a waiting list), or can be purchased on the free market, but only if the license for resale hadn’t been purchased recently (to avoid quick get-rich schemes). Sounds like a much more reasonnable system.
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Seems obvious to me that much of this tragedy could have been averted if cities had taken the responsible step of limiting sales of medallions to active drivers. That, and demanding registration fees from Uber drivers—who are using city streets for their business—would have prevented all of this, including many suicides. Oh, and Uber would have paid those fees, directly or indirectly.
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So Uber and Lyft have done the same thing- basically taking the taxi business and inflating the value of the stock far beyond what it is really worth.
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@Hugh G Nooooooo. Uber and Lyft did not inflate the value of their respective stocks. VC firms that invested in them inflated the value of their stock price. That is why both of their IPO's tanked. The market thought the VC firms overvalued them.
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“Finally, they sold their medallions to their drivers and to rival fleet operators just before the collapse.”
My problem with the premise of this article is that it assumes the NY medallion buyers were prescient and acting in concert. Evidence for which is not provided.
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This post is naive. The speculation follows a standard arc called pump and dump. After a big profit, you dump. Even if the market is still going up, you know it will collapse as soon or soon after you leave because you were the one pumping it up. The article does explain how these people pumped it up.
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I drive to work every day in Chicago, and once I hit the Loop, it's like driving in Beirut due to the taxi drivers. No rules, no manners, it's actually terrifying sharing the road with these guys. I wouldn't mind if Uber or Lyft replaces all of them.
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@Doug Myers -probably not taxi drivers. Mostly Uber & other such companies. They can put unlimited cars on the road with no training, no background checks, no proper insurance, etc. Taxis are regulated, Uber is not.
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I completely disagree. I just spent five years working in the Loop and Chicago taxi drivers are not nearly as scary as NYC cab drivers!
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As for proper insurance, did you know that despite multiple ownership, each cab in New York City is individually incorporated or is an individual LLC and required to have only $100,000 in accident insurance? I know of a case where a young mother and child were run over in a pedestrian crosswalk, and just in the first day in the hospital the bill was well over $100,000, with both sustaining long-term health needs. What insurance do Uber drivers maintain? Perhaps it is time to increase the level of accident insurance per cab? Do they all have the appropriate drivers license? I have noticed an improvement in the English and quality of driving over the last five years of foreign-born cab drivers in New York City.
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In a strange way, what happened with medallions should be something that is under the auspices of the SEC and by extension, predatory lending practices.
A taxi medallion is a sort of security. It is part of a limited, finite issue in a transportation network, issued in tranches....
Its hard to go after someone for abusing an unregulated crack in the system. And it may not have exactly been illegal. It sure was unethical.
While I don’t know as the masterminds necessarily belong in the pen, I do believe it is incumbent upon the states to claw back the manipulated dollars and make the little guy whole. And then, as we enter the next generation of transportation design, ensure this sort of bad behavior cannot happen again.
It smells too much like the arbitrage of Boeskey and Milken in the 80’s and 90’s
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@B.T. There is no way the states are going to claw back the manipulated dollars, as they were the ones who profited from the original sales. They might try to claw back profit from further trading. All this could have been prevented by prohibiting the sale of medallions to anyone other than the original issuing entity, thus allowing them to be auctioned off again. An additional safeguard would be to license medallions for a specific period of time, which can be renewed on payment of a fee.
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I think we’re essentially saying the same thing-but the manipulation happened at both primary market levels (artificially bidding up prices) and the secondary markets.
It wouldn’t be unheard of for a state to revoke and reissue a license, and could be a mechanism to wipe out the driver debt. It depends how the paper creating the medallion is written, and what rights respective states reserved.
Such a maneuver would let them keep their original fees, but the bad actors holding the bag on bad paper.
Its not the way I would remedy this. It would likely reduce a municipal credit rating.
However, rolling back the existing system would allow municipalities to address more than the market manipulation by medallion buyers, resellers and predatory lenders. It would also allow for a single code to govern taxi, ride hail services, as well as the beginning of a framework for self driving vehicles and self-operated, short term vehicle rentals as part of a comprehensive transportation management platform.
Done properly, the cities and states will pocket less upfront cash...but significantly more over time. Plus, such a framework could incorporate climate and pollution policy-something cities know they need to address, but simply haven’t got their heads around the how.
Situations like this actually represent opportunity in this respect. But I grant it is a very large problem with many stakeholders.
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@B.T. Having worked my entire career in a heavily regulated industry in which we needed federal approval and various state approvals (and even among the feds the Navy, the Air Force and Army all had their own programs) with little or no reciprocity, I know something of this. The approvals (not unlike a medallion) required payment of a fee and undergoing a procedural audit. Depending on the entity, the OK might last one year or two or three; and after that, if we wanted to do business, we'd have to jump through those hoops all over again.
Despite the pain and the expense, it was a level playing field and we knew that our competitors had the same costs that we had to bake into our pricing. And it kept the cowboys out so, despite today's conventional wisdom, regulation was a good thing. Too bad that the cities did not see the medallion system as a means to ensure a certain level of quality, expected driver safety and pricing but as a means of raising money.
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This article comes at a time when a similar article could’ve been titled, “New York carriage coach trade gains steam in Chicago.” To those of a certain age, reading this article will remind us of a time when our only option was a vehicle with pungent scents, barely clean pleather, plastic shields that cut down leg room (with laminated signs that’d occasionally scrape a bare knee), and surly drivers who hated credit cards. To anyone under 30 years of age, they’ll wonder, Cabs...what are those?
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@Robert Salm
Exactly correct. Also: drivers who might not stop for you if they didn't like the color of your skin, drivers who would refuse destinations if they thought they might not be able to get a return fare, and cab companies who didn't adopt app-based hailing even when Uber and Lyft were already showing them the future.
They largely brought it upon themselves.
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@Pat So true. It's interesting to ask Taxi drivers how business is with Uber competing. The taxi drivers are like unions hanging on to a failed business model; they always feel entitled.
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Unions made sure that everybody many shared SC table in the US. They may not have been perfect, but their contribution to the United States deserve some more respectful tone. What have you contributed to others?
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Government exempted lenders from regulation but the same folks were surprised when the bubble they co created burst and left hundreds in bankruptcy? I’d love to know what lending rules were exempt and who made those decisions- who greased the wheels to help polo club owners make their money at the expense of can drivers? Unfettered capitalism at work.
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