How NYC is screwing up by giving taxi drivers debt forgiveness
The New York City government has set aside $ 65 million in federal stimulus funds to address the taxi driver debt crisis after days, weeks, months of yellow cab protests for the closure of bridges and highways. Instead of giving money to drivers in need, he instead bailed out wealthy lenders, including a big hedge fund in Connecticut.
This is meant to be a Easy explaining therefore I will not try to understand or make sense of the city’s decision to bail out the lenders and not the drivers. I can only expose the dramas involved.
Taxi drivers are in debt and the city is responsible
Here in New York City, you don’t just paint your car yellow and start picking up people from the streets. You need a special taxi medallion to make your car a taxi and pick up hail, and the city limits the number of medallions there. As you can imagine, with limited supply and high demand, the value of a locket could increase. As Uber and Lyft have completely reshaped the taxi landscape here in the city, that value has plummeted and yellow cab drivers are now underwater, struggling to pay off loans on lockets that are now worth a fraction of that. that they were at the start.
Over the past two decades, the city has not only seen these prices skyrocket, but encouraged it. To give a few figures on this subject, the prices of medallions climbed 455% from 2001 to 2014 (the last medallion auction), as the New York Times reported, only to drop quickly again. This meant that the medallions “went from $ 200,000 in 2002 to over $ 1 million in 2014, then fell to less than $ 200,000 soon after,” as City and State NY Put the.
As The New York Times reported in a series of articles, a group of leaders in the taxi industry had artificially inflated the price of a locket to over $ 1 million by about $ 200,000. They funneled immigrant drivers into bad credit loans they couldn’t afford, creating a buying spree that drove up the price of permits, then extracted hundreds of millions of dollars before the bubble burst.
During the bubble, government officials aggravated the problems by exempting the industry from regulation. The city has also chosen to fill budget gaps by selling medallions and running advertisements promoting the permits as “better than the stock market.”
The city sold these medallions, took advantage of them. Now it’s the drivers who are hurting. As NPR said in 2018, “cities have made millions selling taxi medallions, now drivers are paying the price. “
It is also the city that helped create the debt of the drivers, so its job is easy: cancel the debt. What did the city do? Instead, bailed out the lenders.
What is the city plan?
Let drivers borrow $ 20,000 to pay off their medallion debt, and they can borrow an additional $ 9,000 for other monthly payments.
What does this accomplish?
With drivers in debt of several hundred thousand dollars, that doesn’t accomplish much! Basically all it does is funnel a lot of money to the big lenders without helping the drivers.
How the city is bailing out lenders, not drivers
It would be hard for me to even imagine a debt cancellation plan that foregoes rich lenders and not poor drivers, but that’s exactly what the city is planning. Talk with Business of Business news agency, Bhairavi Desai, leader of the for-profit New York Taxi Workers Alliance, exposed how the city is bailing out lenders using the Marblegate hedge fund for example. Marblegate is based in Greenwich, Connecticut (drivers came all the way to protest last year) and is the largest holder of medallion loans, as reported by Business of Business.
Here’s how the city is giving up on lenders and not drivers by redistributing its relief money to them, as Desai explains:
In 2018 [Marblegate] purchased around 300 taxi medallions, covering their bets on the struggling industry; Uber and Lyft (which don’t require medallions) were just thriving. As of February 2020, Marblegate has started purchasing the Medallion Loans from lenders.
In the proposal the city just announced, locket owners can borrow $ 20,000 from the city at no interest, but this must be used as leverage to negotiate debt restructuring. So the city’s plan is basically to loan the owner / driver $ 20,000, which they can then turn around and offer to the lender, Marblegate, banks or credit unions, with no concessions from the lenders. on the new balance. the loans.
Not only is the city directing its driver-driven stimulus to lenders, it does so without any guarantee that the loans will be repaid in any meaningful way.
How much debt are we talking about here?
“The city’s plan is nowhere near enough to bail out the drivers, who each owe about $ 500,000 in loans on average,” as the NY Times put it recently.
Why the city is bailing out lenders, not drivers
The De Blasio administration is having a lame duck year, with municipal elections in November 2021. Current officials will be looking for work, and it doesn’t look like they want to become taxi drivers. “A lot of them come from finance,” Desai says. “They are considering going back into finance.” Getting a bailout for a big operation like Marblegate doesn’t look bad on this resume.
What taxi drivers want
What the Taxi Workers Alliance plan is for the city to reduce loans to $ 125,000 and bail out the drivers it has helped put into debt. Lenders are still paid, but drivers are in the clear, as Desai explains:
Our proposal was for the city to put in place a safety net – if the hedge fund or the bank reduced the debt to $ 125,000, New York City would guarantee it 100% on delinquencies. The locket owners are protected and the banks and hedge funds would be guaranteed $ 125,000, even if the debt is $ 300,000 for example.
Marblegate can only collect amounts like $ 300,000 if people have assets; they hedge their bets on enough drivers with assets.
Even in the [worst] Scenario, our plan would end up costing the city $ 75 million over 20 years. Our plan is more financially sound and would save lives. Their plan costs more and does absolutely nothing, offers no relief.
The city is still under pressure
This crisis has been going on for years, and it is on the back of protests and direct pressure from other parts of the city government. The protests did not stop (we are in the seventh day of Taxi Workers Alliance protests, with a certain very good food be done in solidarity), and the threat of a lawsuit remains unclear either. New York State Attorney General Letitia James threatened to sue the city for $ 810 million last year, but abandoned the costume at the end of February 2021 in favor of supporting the Taxi Workers Alliance plan. The city may not be completely off the hook, but as The New York Times is currently reporting:
The city could still face a trial from state attorney general Letitia James, whose office investigated the crisis in response to the Times series and found the city to be primarily responsible. Ms James announced last year that unless the city bailed out the taxi drivers, it would sue the city for $ 810 million and give it to the drivers. His office did not respond to a request for comment on whether the mayor’s plan met his findings.
I’m still in awe of the city screwing up a clear and straightforward victory for one of the most public performances of New York City itself, its yellow cabs, and its drivers. The time for debt cancellation is now!