
Reckless Loans Devastated a Generation of Taxi Drivers - sho
https://www.nytimes.com/2019/05/19/nyregion/nyc-taxis-medallions-suicides.html
======
JumpCrisscross
As of 2012 (the last year for which I have data, fewer than 88% [EDIT: 80%] of
taxi medallions were owner operated [1]. (A declining fraction.)

These loans were taken by financiers, not drivers. The anti-ridesharing
messaging is predominantly funded by corporate medallion owners, not by
drivers.

TL; DR This is a co-ordinated media campaign. You have better things to pay
attention too.

[1]
[https://en.m.wikipedia.org/wiki/Taxicabs_of_New_York_City](https://en.m.wikipedia.org/wiki/Taxicabs_of_New_York_City)

~~~
dantillberg
I think you mistyped the "88%". The quoted article says, "As of 2012, about
18% of all taxis were owner operated."

~~~
JumpCrisscross
> _you mistyped the "88%"_

Correct; thank you—fixed.

~~~
ascar
What exactly did you fix? Now it says "EDIT: 80%", while it should say 18%

~~~
ars
It's the difference between "taxis" and "taxi medallions".

~~~
Redoubts
“Fewer than (a high percentage)” is a really weird sentence construction

------
paxys
People blame Uber & Lyft for the current condition of Taxi drivers, but the
blame falls solely on the medallion system. Simply a corrupt, greedy and
exploitative industry eating itself out of existence.

------
omnivore
The street food vendor market in NYC is also really screwed up.
[https://www.nytimes.com/2017/04/18/dining/halal-cart-food-
ve...](https://www.nytimes.com/2017/04/18/dining/halal-cart-food-vendor-new-
york-city.html?smid=tw-nytimes&smtyp=cur)

~~~
klodolph
Agreed… I live in NYC, and in general when I travel to other cities you can
see how much better the food cart situation in other places (for example, if I
travel, I often see food carts that are closed so the operators can take time
off).

------
starik36
> If Mr. Hoque gave him $50,000 that day

That's really all I needed to read: "that day". If someone is putting pressure
on you to buy something "that day" \- it's likely a scam. I am not sure how
this guy didn't read the loan docs.

~~~
loeg
It's a hard sale tactic even at $20, but seems especially obvious when asking
for 1.67x your annual income.

------
Waterluvian
I bought a house recently and learned how in Canada you literally cannot buy a
house you can't afford if your finances are stressed. They test your income
for a hypothetical rate hike and your payments must not exceed a certain
percentage of your income. There's other safeties too, such as requiring 5%
down but significantly incentivising putting >= 20% down.

Can we not have the same kind of thing for all loans? Ie. It becomes illegal
to lend money with terms that the borrower cannot reasonably afford?

On another note:

"Over 10 months, The Times interviewed 450 people, built a database of every
medallion sale since 1995 and reviewed thousands of individual loans and other
documents, including internal bank records and confidential profit-sharing
agreements."

From this I finally grokked what I'm paying for, and just subscribed to my
first periodical.

------
save_ferris
The political machinery in America receives a tremendous amount of input from
private industry, which in turn influences how things are regulated. And then
when things go bad, everyone can say it was just a big mistake. Maybe it'll
end a few careers, but that's about it.

The immigrants in this story had no input in any of this. They had no
representation, no influence. They're among the poorest and least influential
people in our society, and the finance industry just ran roughshod over them.

This will keep happening as long as "we all made mistakes" remains a viable
out for these institutions.

~~~
skybrian
I'm not sure having input into government regulation would have helped as much
as just having someone more knowledgeable look at the terms of the loan?

Maybe there should be a limit to how big a loan you can sign without getting
some kind of legal help?

~~~
kjeetgill
The thing is, if you run the numbers cab drivers have made this investment and
it _has_ been a great investment for a long time. But on 10-20 year timelines
who can account for way Uber/Lyft changed everything?

I'm not that familiar with the regulations and history around medallion
systems, but I can see what the parent post is getting at:

Why does a taxi driver need to take out a loan/risk to work?

When I take a job, there's risk with options or shares maybe, but I don't
incur literal debt to begin work. It's the legal framework around medallions
and private contracting that even put that risk on individuals.

~~~
mbreese
> Why does a taxi driver need to take out a loan/risk to work?

This isn’t about a taxi driver... it’s about owning a taxi medallion. You
don’t need a loan to drive a taxi. If you want to just drive the taxi, you can
work for an existing company. But the company does need a medallion for your
taxi.

This is much more like starting your own business. With a medallion, you can
work your own taxi on your own time schedule - which is the main benefit to
the owner. It’s also an asset that you can rent out to others when you aren’t
using it.

So, taking a new job isn’t the right analogy. Think more like starting your
own company (or more accurately, borrowing money to start your own company).
There is significant freedom in that, but it also carries risk.

------
patio11
The NYT has written about taxi medallions for many years. The contrast in
their writing on them is pretty striking:

[https://cityroom.blogs.nytimes.com/2011/10/20/2-taxi-
medalli...](https://cityroom.blogs.nytimes.com/2011/10/20/2-taxi-medallions-
sell-for-1-million-each/)

I had more boosterism bookmarked back in the day but lost it.

This is a special case of Michael Crighton’s amnesia, where even the NYT
forgets how incompetent the NYT was at getting this story right.

~~~
lorenzk
Relevant Michael Crighton quote:

[https://www.goodreads.com/quotes/65213-briefly-stated-the-
ge...](https://www.goodreads.com/quotes/65213-briefly-stated-the-gell-mann-
amnesia-effect-is-as-follows-you)

------
cbanek
Looking at the data in the graph of medallion prices is very interesting. They
do chart the main line and the 60 day moving average, but it looks like
there's an interesting secondary trend in the data, where there's another line
of sales that looks fairly contiguous but is lighter which seems to be about
25% or maybe 33% of the higher line. Also it looks like there are some higher
lines that look stair-step (probably using round numbers for the prices). I
wonder if these are other sellers or groups, but it seems like the lower line
might be the actual value of a medallion in a not ridiculous price inflation
way?

------
esotericn
The fact that the ability to drive people about in a car became subject to a
financial instrument as a barrier to entry is the real story here.

There are other cities in the world which don't have such an absurd system and
they seem to be doing just fine.

Uber may be outcompeting them, but they haven't taken on mortgage levels of
debt.

~~~
taneq
This. The government artificially restricted supply, driving up demand, and
then pulled the rug out from under taxi drivers by refusing to regulate ride
hailing in a similar manner.

At least there are buybacks happening in some countries now to try and fix the
whole mess: [https://thewest.com.au/news/wa/government-to-introduce-
taxi-...](https://thewest.com.au/news/wa/government-to-introduce-taxi-plate-
buyback-scheme-ng-b88433015z)

~~~
gruez
>then pulled the rug out from under taxi drivers by refusing to regulate ride
hailing in a similar manner.

Did the government make any express guarantees that for-hire vehicles would be
regulated like taxis? If not, I'm not sure how this is any different from any
other type of regulatory risk.

>At least there are buybacks happening in some countries now to try and fix
the whole mess

That seems like the wrong solution to me. It's basically a scheme to socialize
the losses.

~~~
p1necone
From my perspective Uber _are_ taxis, and it seems very strange that they
weren't regulated as such from the beginning.

(Regardless of whether the way local government regulated taxis was good or
not)

~~~
ars
Because they were more like chauffeur services, which existed even before
taxis.

If those were not regulated, neither should Uber.

Taxis are hailed from the street, everyone is isn't.

Even before Uber you could call limo firms, that actually just used regular
cars, and have them drive you, and those were not regulated either.

~~~
p1necone
Ah I see. In my country (New Zealand) the primary way of getting a taxi is to
ring up the taxi company and get them to send you one.

~~~
skinnymuch
You can also do that and the system is awful across America. Not dependable at
all. Customer service and support is usually awful too.

~~~
p1necone
The system seemed _relatively_ alright when I used them before Uber was a
thing. Using an app is easier than calling a taxi company though - although
the main difference is just that Uber and co are _much_ _much_ cheaper than
the taxis used to be. (I can only assume taxi companies must have lowered
their prices to compete by now, but I'm not sure).

------
pm90
> Over 10 months, The Times interviewed 450 people, built a database of every
> medallion sale since 1995 and reviewed thousands of individual loans and
> other documents, including internal bank records and confidential profit-
> sharing agreements.

This ... is so great. I'm glad the NYT continues to do real journalism instead
of succumbing to the Buzzfeed/Social Media whizbang latest breaking news that
the TV media has become.

~~~
mattkrause
Oddly, Buzzfeed News also does some pretty in-depth reporting too. They were
Pulitzer finalists (i.e. , runners up) in 2018 for reporting on Russian
assassinations in the US and UK, and in 2017 for something about trade
agreements(?).

~~~
pm90
I think an apology is in order. They have a reputation for crass reporting on
certain things, but have done some pretty great things otherwise. I guess I
kinda bought into the meme of buzzfeed news not really being news.

~~~
mattkrause
The rest of Buzzfeed is incredibly....frivolous, but I think the news
department is an under-appreciated gem. I almost wish they had given it a
different name.

------
DuskStar
I suppose it's nice to hear that Uber is not uniquely exploitive of drivers -
or even the worst, if I'm understanding things correctly.

~~~
gridlockd
I always wonder how it is "exploitation" of drivers to bring them customers
and pay them _at a loss_ , thanks to venture capital. Can you explain this to
me?

~~~
save_ferris
Because once rideshare companies corner specific markets, they're no longer
incentivized to keep paying drivers competitive rates.

A few years ago, Uber and Lyft left Austin, which in turn created a local,
non-profit MVP rideshare app called RideAustin that worked OK. It wasn't
perfect, but it covered the bare necessities of ridesharing fairly well.

The drivers I spoke with were pretty happy with RideAustin because they made
more money than they had been using Uber and Lyft since RideAustin took a
smaller cut.

When Uber and Lyft returned, they enticed drivers with rates that RideAustin
couldn't keep up with. Within a few weeks, it became a lot harder to hail a
ride through their app. And within a month, I couldn't get a ride consistently
from my apartment in north Austin. If I wanted to get a ride, it had to be
through Uber or Lyft.

Once they regained the market, they cut the rates to drivers, who have no
rights to negotiate pricing since they're contractors. Rideshare drivers are
essentially a captive labor force that must accept all conditions to work
without really any say over what they're paid.

~~~
gridlockd
Wait, you didn't finish the story. Now that RideAustin is once again
(presumably) paying the better rates, why don't the drivers just switch back?
Did RideAustin go out of business?

> Rideshare drivers are essentially a captive labor force that must accept all
> conditions to work without really any say over what they're paid.

They clearly aren't "captive", otherwise they couldn't have just switched to
RideAustin in the first place. Nothing stops them from becoming completely
independent drivers either, but then they need to find their own customers.

In the end, they are getting paid _market rates_. Maybe those rates are really
bad, but that's just what happens when supply is far larger than demand.
Prices are always driven down by the people at the bottom, how can Uber/Lyft
be faulted for that?

~~~
mattzito
Except that the market effects of Uber/Lyft’s network, coupled with their cash
reserves, allows them to potentially distort the free market in such a way
that they can push out the competition until they have a dominant position,
and then it’s no longer a free market economy.

As far as what happened to RideAustin, from last year:

> Uber and Lyft's brand recognition, as well as discounts the companies were
> offering when they returned to Austin, made it difficult to compete,
> RideAustin's Tryba said.

~~~
gridlockd
> Except that the market effects of Uber/Lyft’s network, coupled with their
> cash reserves, allows them to potentially distort the free market in such a
> way that they can push out the competition until they have a dominant
> position, and then it’s no longer a free market economy.

This is the argument against "price dumping", but that strategy doesn't work
in the long run. These companies are burning through their cash reserves to
achieve that "dominant position". Once they're done with that, they will have
to raise prices and competition is viable again.

~~~
mattzito
Sure, in the abstract, but it’s not purely about prices. If I’m a business
traveler who uses Uber in 90% of the cities I visit, I’m not going to price
shop when I visit Austin - a) it’s not my money and b) the friction about
downloading a new app, creating a new account, etc. is probably not worth it.

Secondly, it’s not enough to look at Uber’s price manipulation, it’s necessary
to look at the opportunities that the small, local startup lacks. Even if
their prices are competitive with Uber’s, they likely don’t have the cash to
do what Uber did, namely subsidize/incentivize drivers to drive even when
there are not enough customers.

It becomes a trap: Uber artificially lowers prices, boxing out the smaller
players. Once the market is cornered, raise prices. The smaller players are
now price competitive, but the two-sided marketplace has already been defined.
The passengers are already in an app with their preferences, and the small
percentage who are comparison shoppers might fire up the startup app, only to
find that there are not enough drivers - why? Well the drivers don’t have
enough capacity to keep them busy, so they drop off the startup app to focus
on the big guys.

Free markets are fine and good in a vacuum, but the equivalent to a truly free
ride sharing market would be where there was only one app, all the platforms
put their inventory on it, and users could decide where to put their money,
based on price, luxury, ideals, whatever. To claim the current system is free
market is to willfully ignore the other dynamics at play.

------
akamaka
It's interesting that the graph of taxi medallion sales seems to show a
trimodal distribution: most sales are close to the market price, but many are
consistently at half the market price, and others are much higher, especially
during the bubble years.

What could be the meaning of this pattern?

~~~
SilasX
I think that’s a indicator of an illiquid market, where sales are so few and
far between that sale prices are dominated by the specifics of the situation
(eg if you can buy three at once, if you can buy that specific day, etc).

Like you might see in rare collectibles eg baseball cards.

------
Causality1
This is one reason powerful interests came out of the woodwork against Uber
and Lift in New York. Ridesharing services blew the whistle on how grotesquely
distorted the taxi market was before the corporate vampires were done sucking
the blood out of vulnerable marks.

------
mindslight
How many times do we need to see this repeating pattern of debt bubbles to
address the rigged game?

Remember the concept of indentured servitude? Outrageous debt is the
continuous (non-discrete) version of slavery. Yes, there is always implicit
debt for many transactions. And yes, there is a level of healthy debt that
allows one to purchase a productive asset which pays back its own loan, rather
than needing to sharecrop it. But we're at the level of long term loans never
intended to be paid back, rather to collect a steady steady of rent from those
who produce. Facilitated because the capital being put up is ultimately not
theirs (it comes from public markets because it has nowhere else to go), but
the fees and a portion of the income stream is.

So what we're seeing is that anything that can be titled, abstracted, and
traded ends up heavily financialized. As funny money bids up the underlying
asset prices, more people are pushed into needing loans, furthering the cycle.
And the people who've bought into the bubble want to see it continue to
inflate - it's the only way their rentloan can possibly work out!

Until some underlying factor causes the whole thing to come tumbling down -
limits of financial modeling, too many people going to college, or a hack to
get around taxi supply constraints. By that point most of the loans have been
sold off to dumb money investors, and Wall Street is already working on the
next bubblelicious sector.

The straightforward answer for sustainability is to raise interest rates,
_significantly_. This would reduce the amount of dumb money seeking any place
to go, increase the ability to pay off loans early by making higher than the
minimum payment, as well as shortening the timeframe of most loans in general.

We've been running near zero since Bush II needed a bunch of free money to act
out his daddy issues. The fact that we're looking at banks paying a few
percent as something novel really just demonstrates how warped our perspective
has become. We're repeatedly told that rates must be kept low, and volumes of
new money/debt issued, to assure inflation. Yet in a technological economy, we
should be seeing natural _deflation_! But rather than the gains of technology,
productivity, and outsourcing being seen by the middle class, they're being
funneled upwards by this debt treadmill.

------
smudgymcscmudge
Lenders say they thought medallion prices would keep going up, but I don’t see
how that is possible. At the end of the day, a medallion is a license to
charge a set rate per mile (or minute) in one car. There’s a limit to how much
you can make from a medallion. Any lender who isn’t a moron knows that price
can’t keep going up.

------
gridlockd
The article focuses on the "predatory lending" narrative, but only briefly
touches on what enabled all of this: Government regulation.

Like most professions, Taxi drivers lobbied for regulation to keep the inflow
of competition down. They got it in in the form of the taxi medallion: No one
shall be allowed to drive without it - and the supply is fixed.

Around the inevitable shortage that ensued, a cottage industry of medallion-
hucksters emerged, driving the price to insane highs in places like NYC.

Drivers who didn't see (or understand) the risk were brought to "mortgage"
these medallions at inflated prices, but with the emergence of Uber/Lyft the
value of those medallions dropped. The government, scrambling for a scapegoat,
then tries to ban Uber/Lyft.

------
cascom
Let’s see really the story here is:

asset class [X] declines in value due to [new market entrants] - those that
purchased this asset on a levered basis were hurt the most

------
cletus
It's times like this that I'm really jealous of the foresight of the likes of
Norway.

Norway as we know has massive oil reserves. Most other countries (I come from
Australia where digging stuff up from the ground and selling it Asia is in our
DNA apparently) would for a small cut make some small number of companies and
the individuals who control them mind-bogglingly wealthy. Norway, on the other
hand, created a state majority owned company and taxed it highly, largely for
the benefit of its citizens.

In this case, NYC created the taxi medallion system ~80 years ago to limit the
number of cabs on the road. This made sense at the time but why sell off the
right to drive that taxi essentially in perpetuity? It makes no sense.

Why not instead have an annual auction based on how many taxis you want on the
road where whoever pays you the most gets allotted a license? The city would
get income in perpetuity and financial fuckery like from this post just
couldn't really happen. Hell you could even have a spot market for your
license (for the remainder of the year) to allow people to get out from under
it.

But no, instead we have human vultures preying on the uninformed and
desperate. Another win for capitalism.

------
tmh79
Interesting how the dominant narrative in NYC a year ago was "Uber is making
taxi drivers commit suicide", and now we're seeing that revenues are down only
10%, and the real grift is from the finance guys extracting all the value in
the medallion/transpo market.

I think we're seeing a huge confluence of relatively independent factors
coming together through the form of "private equity" that are going to make
like much more challenging for the bottom 80% of the population. PE fueling a
boom and essentially usury in taxi medallions. Firms like blackrock and other
large REITs buying up an insane amount of homes, jacking up rents and evicting
people. Essential services like 911 dispatch and ambulances being taken over
by PE firms and squeezed to the point of either uselessness (dispatch) or
usurous practices (ambulance billing). I believe in markets and capitalism,
but it's hard for me to see these changes and not sympathize with the new wave
socialists in the US.

~~~
ip26
The sad part is capitalism can probably help solve these problems, but the
professed "ardent free market capitalists" are too devoted to the religion to
consider it. They conveniently ignore that unconscious people can't perform
price discovery, forget that one of the core tenants of a functioning free
market is free flow of pricing information, deny the very existence of
externalities. Essentially, there is a list of conditions required for the
invisible hand to function well, but they seem uninterested, even hostile, to
attempting to establish those conditions.

I struggle to understand how they get so out of whack with even the very
basics. Do they chose their preferred outcome and work backwards? Are they
beholden/captured? Did deifying the free market close the door to tweaking
markets to adjust outcomes (a deity is _always_ right)?

~~~
pm90
> I struggle to understand how they get so out of whack with even the very
> basics. Do they chose their preferred outcome and work backwards? Are they
> beholden/captured? Did deifying the free market close the door to tweaking
> markets to adjust outcomes (a deity is always right)?

It isn't that surprising when you see that the people that usually espouse
such views aren't doing it from a good faith perspective, or are simply
hopelessly naive. The people that do benefit from such policies (namely the
companies that benefit due to regulation) then fund these people, leading to
narratives that are totally out of whack with reality.

Free market capitalism is great when you don't have control over a market and
want a fair chance to take over it. Once you do control the market, it becomes
your most dangerous foe (any group of smart enough people with enough seed
capital and more efficient production has a chance of destroying the company
you built over lifetimes).

