Taxi Industry Leaders Got Rich. Drivers Paid the Price. - The New York Times
▻https://www.nytimes.com/2019/05/21/nyregion/newyorktoday/nyc-news-taxi-medallions.html
In the past year and a half, eight professional drivers, including three taxi medallion owners, have died by suicide. Since 2016, 950 taxi drivers have filed for bankruptcy. And as of Monday, a city task force created last year to study the taxi industry had no members.
The Times published an investigation this week into what caused financial ruin for so many drivers.
Industry disrupters like Uber and Lyft have drawn lots of attention, but the real problem was that lenders made reckless loans as regulators looked on, my colleague Brian M. Rosenthal reported. The loans generated huge profits for lenders, as well as for city coffers.
The practices were similar to those that led to the housing market crash and global financial crisis of 2008. They also created what one analyst called “modern-day indentured servitude.”
Here are five takeaways from Mr. Rosenthal’s investigation.
[Read Part 1 of the investigation: How reckless loans devastated a generation of taxi drivers.]
Uber and Lyft did not cause the crisis in New York City’s yellow taxi industry
The taxi medallion bubble burst in 2014. Uber entered the city in 2011, and Lyft in 2014.
The internet-based ride-hailing companies may have hastened the crisis, but virtually all of the hundreds of industry veterans interviewed for the investigation said the industry would have collapsed regardless because of inflated medallion prices and risky lending practices.
City data shows that 97 percent of yellow cab rides start in central Manhattan, or at the airports, where Uber and Lyft are less popular.
On a per-cab basis, each taxi’s revenue has decreased by about 10 percent since Uber entered New York, according to the city’s data.
Taxi industry leaders artificially inflated the price of taxi medallions
To drive a yellow taxi in the city, you need a medallion.
After years of stability, medallion prices soared from $200,000 in 2002 to more than $1 million in 2014. Some industry leaders have admitted to intentionally causing prices to spike. During that time, revenue generated by taxis barely changed.
Taxi industry leaders steered drivers into reckless loans
From 2002 through 2014, about 4,000 people signed loans to buy taxi medallions.
Drivers borrowed up to $1 million, often without a down payment, according to financial documents. Many were required to repay their loans within three years, which was practically impossible, forcing them to extend the terms of their loans at inflated interest rates.
Hundreds of drivers signed interest-only loans requiring them to forfeit legal rights and indefinitely give up almost every dollar they earned.
You can imagine the toll: Some borrowed even more money, and a few, facing financial and other pressures, died by suicide.
[Read Part 2: How top officials counted money while drivers were trapped in loans.]
Lenders protected themselves by selling those loans
People who made risky taxi loans protected themselves by selling the loans to other institutions.
At the market’s height, the six nonprofit credit unions most involved in the industry sold about $3 billion in medallion loans to 122 other credit unions, according to financial disclosure forms.
Officials ignored years of warning signs
In 2010, a city employee wrote a report showing that cabbies weren’t making enough to support their loans.
In 2014, state inspectors gave a presentation to officials in Albany.
Earlier this year, Corey Johnson, the City Council speaker, shut the committee overseeing the industry, saying it had completed most of its work.
The state attorney general’s office said yesterday that it had opened an inquiry into the lending practices, while Mayor de Blasio ordered a city investigation into the brokers who helped arrange loans.
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