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Why would it be a problem if the prices of taxi medallions drops? People who invested in them will lose money but I don't see how that is a problem for anyone e

Why would it be a problem if the prices of taxi medallions drops? People who invested in them will lose money but I don't see how that is a problem for anyone else.

patmcguire 12y ago
It's all financed. If $5 billion out of $6 billion of equity vanishes overnight, that could be a problem. The first-generation immigrants splitting a medallion and a million dollar loan will lose their life savings, but the bank is losing whatever's left. And if they leveraged it more... It's definitely just someone trying to get free money, but they may also have a point on accident.
- kjksf 12y ago
  No one gives million dollar loans to "first-generation immigrants". Rich people buy the medallions and lease them out to poor people (i.e. taxi drivers). This presents a cash flow issue: they have to pay for a medallion up-front but it only repays itself over many years. Rich people are smart and understand leverage. If the income from leasing medallions produces a better ROI than a cost of the loan, they can get a loan and get more medallions than they otherwise could and become richer even faster. However, a bank only gives loans if you're already rich. My point is that this tugging on emotional strings by invoking "first-generation immigrants loosing their life savings" doesn't reflect the reality of situation. You just can't get a million dollar loan if you're poor. Also, the only thing that vanishes is resell value. This guy is making money by leasing the medallion to drivers. The price he paid affects how long it will take for this investment to pay for itself until he actually starts to make money. Unless he did something stupid (like paying so much that leasing revenues wouldn't repay the cost in his lifetime), he'll keep making lots of money from the medallions that he didn't foreclose on.
  - RockyMcNuts 12y ago
    The leasing rate fluctuates, and if drivers can go drive for Uber and not have to lease a medallion, it's not going to help leasing rates. If he was leasing for enough to service the debt, he wouldn't be looking for a bailout. He sure figured out the American way, take a big risk, if you succeed call yourself a successful entrepreneur and job creator, if you fail blame the government. I don't think he has any leverage, maybe there's some chaos in the yellow cab industry if the medallions get tied up in litigation, but I kind of doubt it.
  - deleted 12y ago
    [deleted]
- sandworm 12y ago
  5 or 6 billion? In NY that's nothing. On wall street those numbers appear and disappear every second of every day. Nobody will even notice.
- brentm 12y ago
  At recent prices it was nothing but a gamble. The way this guy makes a comparison to massive banks is laughable.

Why would it be a problem if the prices of taxi medallions drops? People who invested in them will lose money but I don't see how that is a problem for anyone else.

patmcguire 12y ago

It's all financed. If $5 billion out of $6 billion of equity vanishes overnight, that could be a problem. The first-generation immigrants splitting a medallion and a million dollar loan will lose their life savings, but the bank is losing whatever's left. And if they leveraged it more... It's definitely just someone trying to get free money, but they may also have a point on accident.

kjksf 12y ago
No one gives million dollar loans to "first-generation immigrants". Rich people buy the medallions and lease them out to poor people (i.e. taxi drivers). This presents a cash flow issue: they have to pay for a medallion up-front but it only repays itself over many years. Rich people are smart and understand leverage. If the income from leasing medallions produces a better ROI than a cost of the loan, they can get a loan and get more medallions than they otherwise could and become richer even faster. However, a bank only gives loans if you're already rich. My point is that this tugging on emotional strings by invoking "first-generation immigrants loosing their life savings" doesn't reflect the reality of situation. You just can't get a million dollar loan if you're poor. Also, the only thing that vanishes is resell value. This guy is making money by leasing the medallion to drivers. The price he paid affects how long it will take for this investment to pay for itself until he actually starts to make money. Unless he did something stupid (like paying so much that leasing revenues wouldn't repay the cost in his lifetime), he'll keep making lots of money from the medallions that he didn't foreclose on.
- RockyMcNuts 12y ago
  The leasing rate fluctuates, and if drivers can go drive for Uber and not have to lease a medallion, it's not going to help leasing rates. If he was leasing for enough to service the debt, he wouldn't be looking for a bailout. He sure figured out the American way, take a big risk, if you succeed call yourself a successful entrepreneur and job creator, if you fail blame the government. I don't think he has any leverage, maybe there's some chaos in the yellow cab industry if the medallions get tied up in litigation, but I kind of doubt it.
- deleted 12y ago
  [deleted]
sandworm 12y ago
5 or 6 billion? In NY that's nothing. On wall street those numbers appear and disappear every second of every day. Nobody will even notice.
brentm 12y ago
At recent prices it was nothing but a gamble. The way this guy makes a comparison to massive banks is laughable.