NEW YORK–City leaders here are divided on a bailout for taxi medallion owners here who remain deeply in debt on loans even though the collateral has plunged in value.
Mayor Bill de Blasio is to release a report on Monday following a review of the practices and trends that contributed to the meltdown in taxi medallion values and the loans taken to finance them. That meltdown has led to more than 700 bankruptcies by borrowers, approximately a dozen suicides, the closure of a half-dozen credit unions, and losses to the insurance fund of three-quarters of a billion dollars.
The abuses in taxi medallion lending were detailed by the New York Times in an extensive report that ultimately led to the investigation.
$13 Billion Cost Projected
While city officials and others await the report’s release, the debate is now over whether to bail out the borrowers. While the city has already agreed to waive $10 million in fees owned by medallion owners and created a driver assistance center to give financial counseling and mental health services to drivers, City Hall has estimated a full bailout could cost about $13 billion, although some councilmen say it could be done for less money, the New York Times reported.
de Blasio said during a recent radio interview that many people in the city are suffering and not everyone can be bailed out. He has since released a statement saying, “This report shines a light on many of the predatory practices of the broker industry and with this new insight, we’ll be able to do even more to help taxi drivers too long taken advantage of by those they trusted for guidance and help. If you’re a cabdriver in New York City, know we’re in your corner and that this is just a start.”
‘Getting Screwed Over’
As CUToday.info reported earlier, since the investigation was published, Attorney General Letitia James of New York has opened an inquiry into the lending practices, and political leaders in Albany and Washington have begun discussions about holding hearings and drafting legislation.
“Drivers don’t want some city official telling them they’re getting screwed over,” Bhairavi Desai, the founder of the Taxi Workers Alliance, which represents medallion owners as well as drivers who work for taxi fleets, told the New York Times. “They want to know how their poverty is going to end.”
According to the Times, some members of the City Council expressed optimism that the mayor and other officials will ultimately support a bailout. “This conversation is really just beginning, and I really hope we’re going to get there,” Councilman Stephen T. Levin was quoted as saying.
‘Deep Frustration’
“But others expressed deep frustration,” the Times added. “Several said they were dismayed by City Hall’s estimate for a bailout, which is based on paying $1 million to buy back each of the city’s 13,587 medallions.”
According to some Council members, a proposed bailout would target only medallions that are owned by individual drivers, not fleets. There are between 4,000 and 6,000 driver-owners, they said.
In addition, one councilman told the New York Times the city would not need to spend $1 million per medallion, as the average borrower owes about $500,000 on a medallion. Under one proposal, the city would provide about $100,000 per medallion, with the driver keeping a debt of about $200,000 and the lender being pressured to forgive the rest of the loan, the Times said.