7 ms·

Reckless Loans Devastated a Generation of Taxi Drivers

90 points by sho 7y ago

DuskStar 7y ago
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.
- save_ferris 7y ago
  It's nice to hear that a company we all thought was brutally exploiting drivers isn't even the worst offender? What exactly is nice about that?
  - xmprt 7y ago
    I don't see how Lyft or Uber are brutally exploiting drivers. They could be paying more but there's nothing forcing drivers to drive. The only people I see ride sharing companies harming are the taxi drivers who are stuck with medallions.
    - save_ferris 7y ago
      > They could be paying more but there's nothing forcing drivers to drive Drivers take the low pay largely because they lack better alternatives. As long as that remains true and drivers can't negotiate pay, the drivers are absolutely being exploited. Rideshare companies aren't going to raise rates because there's no labor competition to threaten their workforce and boost wages. On top of that, drivers can't negotiate pay. How many people do you really think take jobs like that with low pay and no negotiating power because they really really want to? Many of the drivers I've ridden with don't have many other options.
      - mactrey 7y ago
        But how are Uber and Lyft specifically exploitative in ways that e.g. WalMart, McDonalds, Starbucks, local landscaping companies, etc. aren't? Those jobs all pay roughly similar wages.
        icebraining 7y ago
        Or, for that matter, non-profits like Meals-on-Wheels, Home of Guiding Hands or Habitat for Humanity.
        save_ferris 7y ago
        The fact that Uber and Lyft aren't alone in no way invalidates their behavior. "But everyone is doing it" is not an effective argument here. It's a major, major problem that everyone is doing it. There's an entire political movement eager to campaign on that has been gaining energy the last few years because people are losing faith in the current system.
        mactrey 7y ago
        It doesn't validate their behavior but it points toward the issue being systematic within the U.S. economy rather than due to the corporate governance at Lyft and Uber.
        rileymat2 7y ago
        None of those businesses expect employees to take capital risk by categorizing them as contractors. They are quite different in that respect.
        gridlockd 7y ago
        I'm quite sure these companies work with plenty of contractors, you just haven't heard of them. I would also wager that the vast majority of ordinary taxi drivers are self-employed and working for some agency, an arrangement not too dissimilar to that of Uber/Lyft.
    - gridlockd 7y ago
      > They could be paying more... Could they though? Can Uber be expected to lose money at an even faster rate?
- gridlockd 7y ago
  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?
  - b_tterc_p 7y ago
    Let’s imagine a slave cotton plantation was unprofitable due to poor weather, some burglary, and other external factors. Is the cotton plantation not exploiting the slaves? The final profit margin has nothing to do with the concept of exploitation.
    - el_dev_hell 7y ago
      > Let’s imagine a slave cotton plantation was unprofitable due to poor weather, some burglary, and other external factors. Is the cotton plantation not exploiting the slaves? You don't see the glaring differences between a slave on a cotton plantation and an Uber driver?
      - scarejunba 7y ago
        The original argument has two independent parts: 1. Access to customer base 2. Subsidizing the service provider over market rates You're responding to an argument that is claiming that the second thing is irrelevant to the conclusion. i.e. whether or not you are subsidizing the service provider at a loss is irrelevant for the exploitation value. The exploitation is coming from elsewhere, and the subsidizing doesn't do anything about it. I, personally, don't think they are being exploited but I agree that the subsidy doesn't remove exploitation if it did exist.
        b_tterc_p 7y ago
        Yes this is what I meant. Slavery is a convenient example where exploitation is obviously occurring but could still encounter the same loss as the parent had claimed was proof of no exploitation.
  - 7y ago
gridlockd 7y ago
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.
save_ferris 7y ago
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 7y ago
  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?
  - mattigames 7y ago
    When a natural-person is involved a voice recording of a good summary of what you are agreeing with should be mandatory by _regulation_, there should be a notarized recorded statement saying something like "I Mohammed Hoque agree to pay 1.7 million dollars before 4 years from today [...]"
  - ordu 7y ago
    There is an easier way. It is possible to shift balance of protection to the borrower. As an absurd example: allow borrower to deny his loan. The troubles with too big loans will end instantly, because lenders will think not just twice, but thrice and even ten times. This absurd way is absurd, but lawmakers could make it gentlier in a reasonable way. Give a consumer more protection, shift more risks unto lender's side and viola, you need not to pay fees for a legal help, while system works much more reliable, because lender would pay from his own pocket for a stupid loan. Borrower mistanderstood terms of a loan and couldn't pay? So lets write off 90% of his debt, let him pay remaining 10%. Who is the dumb one now? Not the borrower who couldn't understand the terms of the loan, but a lender who hadn't bothered to make terms to be crystal clear to the borrower. I'm not sure does it counts as a govermental regulation, I believe not, because government needs to tweak system a bit, and then system would regulate itself. In any case it is the easiest way. But lenders do not agree of course.
deleted 7y ago
[deleted]
tmh79 7y ago
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.
- gridlockd 7y ago
  > 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. What's happening isn't due to capitalism. It's all symptoms of monetary policy. Prices for real estate are driven up by cheap money, not just PE. Then, when the bubble pops, everyone gets a bailout by the nanny state. If the market shows sign of weakness, no more interest rate hikes. Risk has been eliminated. The party has to go on at all costs, because if interest rates normalize, asset prices will tank, debt will become unservicable, mortgages will default, 401Ks will be wiped out...
- ip26 7y ago
  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)?
omnivore 7y ago
The street food vendor market in NYC is also really screwed up. https://www.nytimes.com/2017/04/18/dining/halal-cart-food-vendor-new-york-city.html?smid=tw-nytimes&smtyp=cur https://www.nytimes.com/2017/04/18/dining/halal-cart-food-ve...
- klodolph 7y ago
  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 7y ago
> 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 7y ago
  It's a hard sale tactic even at $20, but seems especially obvious when asking for 1.67x your annual income.
akamaka 7y ago
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 7y ago
  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.
- Scoundreller 7y ago
  Could be money laundering. Or tax evasion of transfer taxes and/or capital gains taxes.
esotericn 7y ago
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 7y ago
  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-plate-buyback-scheme-ng-b88433015z https://thewest.com.au/news/wa/government-to-introduce-taxi-...
  - kjeetgill 7y ago
    To temper this slightly, there are ways to artificially restrict supply without involving financial instruments. Just have a regular permitting/lisence system.
    - Scoundreller 7y ago
      > I can only assume taxi companies must have lowered their prices to compete by now, but I'm not sure Doubtful. “Fares“ were strictly regulated by the regulators. With rideshare competition, taxis have become a lot less likely to moan that your ride is too short, or trying to charge extra just because there’s a ton of demand at that time.
  - gruez 7y ago
    >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.
cbanek 7y ago
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?
paxys 7y ago
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.
JumpCrisscross 7y ago
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 7y ago
  I think you mistyped the "88%". The quoted article says, "As of 2012, about 18% of all taxis were owner operated."
  - JumpCrisscross 7y ago
    > you mistyped the "88%" Correct; thank you—fixed.
    - ascar 7y ago
      What exactly did you fix? Now it says "EDIT: 80%", while it should say 18%
      - ars 7y ago
        It's the difference between "taxis" and "taxi medallions".
        Redoubts 7y ago
        “Fewer than (a high percentage)” is a really weird sentence construction
- matthewowen 7y ago
  Although the article touches on "ride-sharing", it isn't really about that: the trigger could have been something else, and even without the drop in value these would have been predatory loans.
pm90 7y ago
> 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 7y ago
  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 7y ago
    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 7y ago
      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.
Waterluvian 7y ago
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.
Causality1 7y ago
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.
patio11 7y ago
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-medallions-sell-for-1-million-each/ https://cityroom.blogs.nytimes.com/2011/10/20/2-taxi-medalli... 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 7y ago
  Relevant Michael Crighton quote: https://www.goodreads.com/quotes/65213-briefly-stated-the-gell-mann-amnesia-effect-is-as-follows-you https://www.goodreads.com/quotes/65213-briefly-stated-the-ge...
smudgymcscmudge 7y ago
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.
mindslight 7y ago
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.
cletus 7y ago
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.
cascom 7y ago
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

90 points by sho 7y ago

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.

save_ferris 7y ago
It's nice to hear that a company we all thought was brutally exploiting drivers isn't even the worst offender? What exactly is nice about that?
- xmprt 7y ago
  I don't see how Lyft or Uber are brutally exploiting drivers. They could be paying more but there's nothing forcing drivers to drive. The only people I see ride sharing companies harming are the taxi drivers who are stuck with medallions.
  - save_ferris 7y ago
    > They could be paying more but there's nothing forcing drivers to drive Drivers take the low pay largely because they lack better alternatives. As long as that remains true and drivers can't negotiate pay, the drivers are absolutely being exploited. Rideshare companies aren't going to raise rates because there's no labor competition to threaten their workforce and boost wages. On top of that, drivers can't negotiate pay. How many people do you really think take jobs like that with low pay and no negotiating power because they really really want to? Many of the drivers I've ridden with don't have many other options.
    - mactrey 7y ago
      But how are Uber and Lyft specifically exploitative in ways that e.g. WalMart, McDonalds, Starbucks, local landscaping companies, etc. aren't? Those jobs all pay roughly similar wages.
      - icebraining 7y ago
        Or, for that matter, non-profits like Meals-on-Wheels, Home of Guiding Hands or Habitat for Humanity.
      - save_ferris 7y ago
        The fact that Uber and Lyft aren't alone in no way invalidates their behavior. "But everyone is doing it" is not an effective argument here. It's a major, major problem that everyone is doing it. There's an entire political movement eager to campaign on that has been gaining energy the last few years because people are losing faith in the current system.
        mactrey 7y ago
        It doesn't validate their behavior but it points toward the issue being systematic within the U.S. economy rather than due to the corporate governance at Lyft and Uber.
      - rileymat2 7y ago
        None of those businesses expect employees to take capital risk by categorizing them as contractors. They are quite different in that respect.
        gridlockd 7y ago
        I'm quite sure these companies work with plenty of contractors, you just haven't heard of them. I would also wager that the vast majority of ordinary taxi drivers are self-employed and working for some agency, an arrangement not too dissimilar to that of Uber/Lyft.
  - gridlockd 7y ago
    > They could be paying more... Could they though? Can Uber be expected to lose money at an even faster rate?
gridlockd 7y ago
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?
- b_tterc_p 7y ago
  Let’s imagine a slave cotton plantation was unprofitable due to poor weather, some burglary, and other external factors. Is the cotton plantation not exploiting the slaves? The final profit margin has nothing to do with the concept of exploitation.
  - el_dev_hell 7y ago
    > Let’s imagine a slave cotton plantation was unprofitable due to poor weather, some burglary, and other external factors. Is the cotton plantation not exploiting the slaves? You don't see the glaring differences between a slave on a cotton plantation and an Uber driver?
    - scarejunba 7y ago
      The original argument has two independent parts: 1. Access to customer base 2. Subsidizing the service provider over market rates You're responding to an argument that is claiming that the second thing is irrelevant to the conclusion. i.e. whether or not you are subsidizing the service provider at a loss is irrelevant for the exploitation value. The exploitation is coming from elsewhere, and the subsidizing doesn't do anything about it. I, personally, don't think they are being exploited but I agree that the subsidy doesn't remove exploitation if it did exist.
      - b_tterc_p 7y ago
        Yes this is what I meant. Slavery is a convenient example where exploitation is obviously occurring but could still encounter the same loss as the parent had claimed was proof of no exploitation.
- 7y ago

gridlockd 7y ago

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.

save_ferris 7y ago

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 7y ago
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?
- mattigames 7y ago
  When a natural-person is involved a voice recording of a good summary of what you are agreeing with should be mandatory by _regulation_, there should be a notarized recorded statement saying something like "I Mohammed Hoque agree to pay 1.7 million dollars before 4 years from today [...]"
- ordu 7y ago
  There is an easier way. It is possible to shift balance of protection to the borrower. As an absurd example: allow borrower to deny his loan. The troubles with too big loans will end instantly, because lenders will think not just twice, but thrice and even ten times. This absurd way is absurd, but lawmakers could make it gentlier in a reasonable way. Give a consumer more protection, shift more risks unto lender's side and viola, you need not to pay fees for a legal help, while system works much more reliable, because lender would pay from his own pocket for a stupid loan. Borrower mistanderstood terms of a loan and couldn't pay? So lets write off 90% of his debt, let him pay remaining 10%. Who is the dumb one now? Not the borrower who couldn't understand the terms of the loan, but a lender who hadn't bothered to make terms to be crystal clear to the borrower. I'm not sure does it counts as a govermental regulation, I believe not, because government needs to tweak system a bit, and then system would regulate itself. In any case it is the easiest way. But lenders do not agree of course.

deleted 7y ago

[deleted]

tmh79 7y ago

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.

gridlockd 7y ago
> 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. What's happening isn't due to capitalism. It's all symptoms of monetary policy. Prices for real estate are driven up by cheap money, not just PE. Then, when the bubble pops, everyone gets a bailout by the nanny state. If the market shows sign of weakness, no more interest rate hikes. Risk has been eliminated. The party has to go on at all costs, because if interest rates normalize, asset prices will tank, debt will become unservicable, mortgages will default, 401Ks will be wiped out...
ip26 7y ago
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)?

omnivore 7y ago

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

klodolph 7y ago
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 7y ago

> 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 7y ago
It's a hard sale tactic even at $20, but seems especially obvious when asking for 1.67x your annual income.

akamaka 7y ago

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 7y ago
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.
Scoundreller 7y ago
Could be money laundering. Or tax evasion of transfer taxes and/or capital gains taxes.

esotericn 7y ago

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 7y ago
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-plate-buyback-scheme-ng-b88433015z https://thewest.com.au/news/wa/government-to-introduce-taxi-...
- kjeetgill 7y ago
  To temper this slightly, there are ways to artificially restrict supply without involving financial instruments. Just have a regular permitting/lisence system.
  - Scoundreller 7y ago
    > I can only assume taxi companies must have lowered their prices to compete by now, but I'm not sure Doubtful. “Fares“ were strictly regulated by the regulators. With rideshare competition, taxis have become a lot less likely to moan that your ride is too short, or trying to charge extra just because there’s a ton of demand at that time.
- gruez 7y ago
  >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.

cbanek 7y ago

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?

paxys 7y ago

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.

JumpCrisscross 7y ago

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 7y ago
I think you mistyped the "88%". The quoted article says, "As of 2012, about 18% of all taxis were owner operated."
- JumpCrisscross 7y ago
  > you mistyped the "88%" Correct; thank you—fixed.
  - ascar 7y ago
    What exactly did you fix? Now it says "EDIT: 80%", while it should say 18%
    - ars 7y ago
      It's the difference between "taxis" and "taxi medallions".
      - Redoubts 7y ago
        “Fewer than (a high percentage)” is a really weird sentence construction
matthewowen 7y ago
Although the article touches on "ride-sharing", it isn't really about that: the trigger could have been something else, and even without the drop in value these would have been predatory loans.

pm90 7y ago

> 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 7y ago
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 7y ago
  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 7y ago
    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.

Waterluvian 7y ago

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.

Causality1 7y ago

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.

patio11 7y ago

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-medallions-sell-for-1-million-each/ https://cityroom.blogs.nytimes.com/2011/10/20/2-taxi-medalli... 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 7y ago
Relevant Michael Crighton quote: https://www.goodreads.com/quotes/65213-briefly-stated-the-gell-mann-amnesia-effect-is-as-follows-you https://www.goodreads.com/quotes/65213-briefly-stated-the-ge...

smudgymcscmudge 7y ago

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.

mindslight 7y ago

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.

cletus 7y ago

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.

cascom 7y ago

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