Bailout Up to $500 Million Proposed for Taxi Drivers Trapped in Loans New York Times 1/16/20

Bailout Up to $500 Million Proposed for Taxi Drivers Trapped in Loans

The proposal is the most far-reaching step taken in response to a Times investigation into exploitative practices in the industry.


New York Times Article
Bailout Up to $500 Million Proposed for Taxi Drivers

A high-level New York City panel appointed by Mayor Bill de Blasio and other officials intends to propose a bailout for thousands of taxi drivers trapped in exploitative loans that could cost as much as $500 million, several panel members said this week.

The panel, which has been meeting regularly since last summer, wants a new public-private partnership to essentially absorb much of the debt that the drivers took on in recent years in order to buy medallions, the city-issued permits that let them own cabs. Many of the medallions were sold at artificially inflated prices by industry leaders who brought about one of the biggest speculative loan bubbles since the American financial crisis.

The drivers, nearly all of whom are immigrants, were channeled into reckless loans totaling billions of dollars, leaving many bankrupt and struggling to survive.

The proposal would call for the partnership to buy medallion loans at discounted prices and ease the burden on borrowers by forgiving much of the debt and lowering interest payments, panel members said.

Officials cautioned that they were still working out the details of the proposal. Mr. de Blasio has not indicated whether he would support it. In the past, he has expressed skepticism about a city-funded bailout. His office said this week it would review the panel’s recommendations after they are finalized.

Corey Johnson, the City Council speaker, who appointed most of the panel’s members, said on Wednesday that its emerging plan was an important milestone, an indication that he was open to spending a significant amount of city money to help drivers.

“We know that folks in this industry have suffered tremendously,” Mr. Johnson said. “I’m really excited that after six months of painstaking work and effort, the task force is going to be releasing a variety of recommendations that we think could stabilize the industry, plan for the future and help alleviate the suffering.”

Some panel members said the partnership would aim to raise up to $500 million, while others, including leaders of the City Council, said the numbers were still being finalized and the report would not list any amounts. The city might have to contribute a portion of the total, but most of the money would come from private donors. Investors could receive incentives for contributing to the fund and would earn a return on the loans.

The 19-member panel, which is headed by two powerful members of the Council, is set to release a report with the proposal this month.

Even with the mayor’s backing, organizers would have to raise money and convince lenders to sell loans. One issue is that the National Credit Union Administration, a federal agency that is now the largest holder of taxi medallion loans, is already considering selling off its loans to for-profit debt collectors and others who are unlikely to give borrowers a break.

Bhairavi Desai, founder of the Taxi Workers Alliance, a group of drivers, who is on the panel, expressed confidence in the plan.

“This is the most optimistic I have ever felt about solving this crisis,” said Ms. Desai, adding that several donors have already expressed interest.

“We’re going to win,” she said.

The proposal would be the most far-reaching step taken so far in response to a New York Times investigation that revealed more than a decade of exploitative practices in the industry.

The Times found that a group of industry leaders artificially inflated the price of a medallion to more than $1 million from about $200,000, channeled immigrant drivers into reckless loans to purchase medallions and extracted hundreds of millions of dollars before the bubble burst.

The practices set off a crisis that has been intensified by the arrival of ride-hailing companies such as Uber and Lyft. The new apps have reduced the revenue that yellow cabs receive, but virtually all of the hundreds of industry veterans interviewed by The Times said the bubble would have burst even if ride-hailing had never been invented.

Taxi industry leaders have denied wrongdoing, describing their tactics as normal business practices and noting that regulators approved their methods. They have blamed the industry’s financial crisis exclusively on Uber and Lyft.