Monday’s Headlines: No Wonder Cabbies are Going Bankrupt Edition

The taxi industry. Photo: WCBS
The taxi industry. Photo: WCBS

Sunday started with a bombshell, as the New York Times’s Brian Rosenthal — he of the still-discussed “expensive tunnel” story in 2017 — unveiled his latest investigative effort: a months-long look into how the New York City taxi medallion market was propped up on bad loans only to pop like the housing bubble during the sub-prime era. The victims? Mostly immigrant cabbies.

“The whole thing was like a Ponzi scheme because it totally depended on the value going up,” said Haywood Miller, a debt specialist, who offered the money quote. “The part that wasn’t fair was the guy who’s buying is an immigrant, maybe someone who couldn’t speak English. They were conned.” America’s fairest big city, Mr. Mayor? It doesn’t seem like it in Rosenthal’s series. (Part II of the investigation is here.)

Pity the poor reporters at the other papers who had to match Rosenthal’s report. The Post stuck with the same angle as the Times, while the Daily News added some value with some statistics about the damaging role Lyft and Uber played.

Meanwhile, here was the rest of the news:

  • It was a carnage-filled weekend, with a cabbie killing an 80-year-old on Broome Street on Saturday, and a man crushed by a tractor trailer truck a day earlier, which the Daily News covered. Kudos to the Post’s Laura Italiano for pointing out that the cabbie got away with little more than a traffic ticket. Also on Friday, the NYPD reported the May 8 death of 68-year-old pedestrian Maria Ruiz-Amaya, who had been hit by a driver on 108th Street in Queens a week earlier (QNS).
  • The Post gloated a bit too much over the low ridership on the LIRR’s new South Fork Commuter Connection. It’s only been operating for two months!
  • A federal lawsuit may finally get the MTA to add elevators to stations. (NY1)
  • The News’s Clayton Guse wrote about a new company called Charge that wants to install docks for e-scooters so they don’t clutter the sidewalks. We’re not convinced Charge’s plan to put docks in private garages will work without a major public component — which seems unlikely from Mayor de Blasio.
  • It looks like Chuck Schumer has caught President Trump’s cold (war). (NY Post, NYDN)
  • And, finally, when are we going to get rid of this untested technology? (NY Post)
  • Joe R.

    The big problem with taxi medallions is that what is essentially a business license was allowed to be bought and sold (and manipulated) on the open market. Medallion speculators who could afford to buy hundreds of medallions artificially inflated the price. The little guy got sucked in, buying medallions not for the right to earn money driving a taxi, but rather as an “investment” to put their kids through college. As with all bubbles, this one had to burst. Ditto for the NYC real estate market which is currently artificially inflated due to real estate speculators.

    The real problem here is that these bubbles form because people are uneducated enough and/or greedy enough to think they’ll keep going up, even long after the prices are past any point which makes sense. At least with real estate there’s some inherent value, so when the bubble bursts, real estate in NYC will probably still keep at least 1/3 to 1/2 of its value. The market for medallions had no such bottom. In the end it’s a business license whose only inherent worth is the potential income you can derive from driving a taxi. Uber and Lyft radically decreased that potential income. Unfortunately, the little guy got caught in the middle. That’s who I really feel sorry for. Maybe we should bail out individual owner/operators who got taken for a ride but only them. Let the ones who started this nonsense by hoarding medallions by the dozens or hundreds lose everything. And after the bailout of the little guy reform the medallion system. Medallions will only be sold to a person who intends to drive the taxi as an owner/operator. Renting out medallion cabs will be prohibited, as will owning more than one medallion. Medallions will only cost enough to cover processing fees, and won’t be allowed to be bought or sold on the open market. When you no longer wish to drive a taxi, you surrender your medallion. The next person on the waiting list is offered the option to buy it.

  • Larry Littlefield

    “A federal lawsuit may finally get the MTA to add elevators to stations.”

    Or shut down entire lines, because given what the contractors and construction unions charge, it cannot afford to do so.

    Meanwhile, it is all over the news this morning that subway service is the best it has been since 2013, when it was already bad, while LIRR service is the best since 2002, two years after the 2000 retroactive pension increase and Pataki/Siver/Brunos’s decision to keep loading the MTA with debt even as tax revenues were rolling in. The same decision that has been made over and over ever since.

    Somebody issue a press release, and flacked this. But there were no press releases when service was going to hell. It wasn’t really a cover up, because it was in the board materials, but nobody bothered to read the board materials. And it never hit the news, outside of Gothamist.

    https://larrylittlefield.wordpress.com/2016/08/23/the-subway-mean-distance-between-failures-falling-so-is-the-1980s-returning/

    Somebody benefitted this, by getting money that should have been going to maintenance and service, or by not doing their job. And we are still suffering the consequences. And accountability is still zero.

  • Vooch

    a 20 foot long curbside space on every single City block should be reallocated to storage of active transportation private property ( aka scooters & bicycles & maybe even wheelchairs)

    Frame the subject this way …..and we win

  • Larry Littlefield

    “The real problem here is that these bubbles form because people are uneducated enough and/or greedy enough.”

    Bubbles from because of the financial sector. People who work in it are educated enough to avoid doing things that are inherently stupid. But things that are smart until they are overdone and then become stupid? That happens 100 percent of the time.

    https://larrylittlefield.wordpress.com/2018/10/12/the-stock-market-for-those-of-you-keeping-score-at-home/

    Are your savings in cash right now? Or expecting the federal government to step in to keep asset prices inflated to benefit older generations and the rich once again?

    https://larrylittlefield.wordpress.com/2017/12/09/fannies-mae-and-freddie-macs-stealth-economic-war-on-the-millennials/

    (And, by the way, what is cash?)

  • Janet Liff

    Excellent Times piece and you’d think that maybe the city would learn from history. Back in 1959, the city capped taxis because they were flooding the streets. How could we not have done with same with FHV’s? Of note, didn’t Michael Cohen’s family make money from the cab business? No surprise there.

  • Fool

    I am convinced that the South Fork Shuttle could have, and should have been operated by a contractor.

  • TacoKnight

    Cohen himself, owned or co-owned either 30ish or 200 medallions, depending on how you parse his, Simon Garber’s, or Evgeny Freidman’s stories/financial records. But it was Cohen, not his family, who made his money in the taxi cab business through these inflated costs, etc.

  • Larry Littlefield

    Sort of off topic, but it appears folks have started using Public Use Microdata Sample data to show just how screwed later born generations have been left. (WSJ$)

    https://www.wsj.com/articles/playing-catch-up-in-the-game-of-life-millennials-approach-middle-age-in-crisis-11558290908?mod=trending_now_1

    So in what way should they be worse off, to benefit those who came before? One thing is for sure, they can’t afford that lifestyle with one car per driving age adult in oversized one-family homes where they are forced to drive everywhere.

    Imposing those requirements by government fiat, while also insisting on tax breaks for seniors, running up public debts, disinvesting in the infrastructure, retroactively increasingly pensions for those cashing in and moving out, slashing benefits for new hires — more making them independent contractors — is, shall we say, a little unfair.

  • Urbanely

    Part of the speculation by regular folks is also that the rates on regular old savings accounts has been abysmal for a long time. There will always be the greedy and unscrupulous, but once upon a time, you could put money in the bank and while you wouldn’t get rich, you’d get something. Now, regular folks are being pushed towards increasingly sophisticated investments just to get those same boring returns. Sadly, there will be many more bubbles to come.

  • Larry Littlefield

    You buy any asset now you are locked into a negative yield relative to inflation. That’s what young people trying to save for their future are faced with. In Europe and Japan, you get yields that are nominally negative.

    The question is, what happens when the richest generations in history have to sell to poorer later born generations?

    They have done all kinds of stuff to keep those asset prices inflated — and thus those future returns low. Can they keep it up? It’s a war of attrition.

  • How could you miss that Hoboken is launching e-scooters today?

  • Larry Littlefield

    Bloomberg saw medallion brokers profiting from limited supply by getting rich off the bubble, and promised to destroy them.

    https://www.theatlantic.com/business/archive/2013/05/mike-bloomberg-wants-to-fucking-destroy-the-taxi-industry-heres-how-he-could-do-it/276238/

    I guess individuals who bought at the peak of the bubble are the collateral damage. It never should have been permissible for someone other than a driver to own them for their own use.

  • Joe R.

    Tell me about it. I would be thrilled if savings accounts were offering the 5% they traditionally offered. In fact, my savings account was giving 8.5% when I opened it in 1989. That kept going down until it was essentially zero. I was surprised. I always thought by law the minimum interest on savings accounts had to be at least 5%. I guess not. It only seemed that way because that’s what you got for years, until the people who run banks started getting greedy.

  • Joe R.

    It would be poetic justice if the bubble burst before they can cash in. While it won’t make up for all the other damage they caused, at least their losses will mean they’re paying for some of what they took.

  • Larry Littlefield

    People would probably say I’m a pessimist for having money in cash, and a sadist for cheering for a crash.

    But high asset prices aren’t good for everyone. They are good for some people at the expense of others. Or even themselves. So my little rowhouse is theoretically worth $2 million. So what? I want my kids to live nearby, and at current prices they couldn’t even afford a 2 BR condo — ever.

    And I optimistically believe that someday the actual cash dividend yield on stocks will be something better than half its historic average, and it will be funded by businesses actually earning money rather than going deeper into debt.

  • Joe R.

    Same situation here. My mom’s crappy little 1950s house, which my parents bought for $52K in 1978, is worth $800K but it’s not doing us any good. The only thing the high price will do is make it impossible for me to buy out my siblings after my mom dies. Unless they forgo their share because I cared for their mother, I’m basically out on the street after my mother goes. At these inflated prices I don’t have enough money to buy anything, while still having enough left over to live on. So yeah, I’m rooting for a real estate crash at least, although not necessarily for a stock market crash.

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