TAXI CAB BROKEN DREAMS

July 12, 2019 at 4:30 am

Scores of cab drivers were conned into reckless loans to purchase now almost worthless taxi medallions, leading some to take their own lives, and putting the American dream forever out of reach for others.

Aired on May 30 & July 11, 2019. 

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>>> DROWNING IN DEBT AND SOME
EVEN DRIVEN TO SUICIDE.
UNTIL RECENTLY DRIVING A CAB IN
NEW YORK CITY WAS VIEWED AS A
GATEWAY TO THE MIDDLE CLASS
ESPECIALLY IF DRIVERS COULD GET
THEIR HANDS ON A COVETED
MEDALLION.
BUT DRIVERS TOOK OUT LOANS MANY
OF THEM COULD NOT AFFORD.
WHEN UBER AND LYFT TOOK OVER THE
STREETS, THEIR VALUE PLUMMETED,
DRIVING SOME TO FINANCIAL RUIN
AND SOME EVEN TO SUICIDE.
NOW A "NEW YORK TIMES"
INVESTIGATION REVEALS THE REASON
FOR THIS MEDALLION MELTDOWN, A
MASSIVE LENDING SCAM DATING BACK
DECADES, ALSO ALLEGING
CORRUPTION AMONG CITY, STATE AND
FEDERAL AGENCIES MEANT TO
ENFORCE FINANCIAL LAWS.
JOINING US NOW IS THE REPORTER
WHO BROKE THE STORY BRIAN
ROSENTHAL.
>> THANKS FOR HAVING ME.
>> IT WAS A VERY REVEALING
REPORT THAT YOU ALL DID AND AN
EXTRAORDINARILY IN-DEPTH REPORT.
LET ME START BY PROVIDING SOME
CONTEXT FOR SOME OF OUR VIEWERS.
WE TALK ABOUT MEDALLIONS.
WHAT ARE THESE MEDALLIONS AND
WHAT'S THE ROLE THEY PLAY IN
TERMS OF FOLKS OPERATING TAXIS
IN NEW YORK CITY?
>> SO IF YOU WANT TO OWN A
YELLOW CAB AND HAVE IT ON THE
STREETS, YOU HAVE TO GET ONE OF
THESE MEDALLIONS.
THERE ARE 13,000 OF THEM
ORIGINALLY ISSUED BY THE CITY.
ONCE THEY WERE ISSUED THEY COULD
BE RESOLD.
ABOUT HALF OF THEM ARE OWNED BY
FLEETS, BY BIG CORPORATIONS THAT
OWN HUNDREDS OF CABS.
THE OTHER HALF ARE OWNED BY
INDIVIDUAL DRIVER OWNERS.
>> IN THE STORY YOU SHOW
DRAMATICALLY THE INCREASE IN THE
COST OF THESE MEDALLIONS,
TALKING ABOUT NOT THAT LONG AGO
ABOUT $100,000 AND THEN A FEW
YEARS AGO UP OVER A MILLION
DOLLARS.
HOW DOES THAT DRAMATIC INCREASE
HAPPEN?
>> WELL, I TELL YOU HOW IT
DIDN'T HAPPEN.
IT DIDN'T HAPPEN BECAUSE THE
CABS WERE MAKING MORE MONEY.
>> THAT WAS GOING TO BE MY
FOLLOW-UP QUESTION BUT THAT'S A
GOOD WAY TO START OFF.
>> THE REVENUE THE CABS WERE
MAKING BASICALLY CHANGED.
WHAT CHANGED WAS A FEW THINGS.
FIRST OF ALL, THE CITY STARTED
SELLING NEW MEDALLIONS AT
AUCTIONS AND THEY STARTED AHEAD
OF THOSE AUCTIONS PROMOTING THE
SALES BY TAKE ING OUT ADS ON
TELEVISION, IN RADIO, IN
NEWSPAPERS SAYING THIS WAS
BETTER THAN THE STOCK MARKET,
THAT THIS WAS A PATH TO A WORRY
FREE RETIREMENT.
SO THAT WAS GOING ON.
THEN THERE WERE ALSO PEOPLE WHO
WERE MANIPULATING THE PRICE,
PEOPLE THAT ALREADY OWNED A LOT
OF MEDALLIONS WOULD GO TO THE
AUCTION AND PURPOSELY OVERPAY TO
BUY A MEDALLION BECAUSE THAT
WOULD MAKE EVERYBODY ELSE THINK
MEDALLIONS WERE WORTH MORE.
SO THAT WAS GOING ON.
BUT THE BIGGEST FACTOR THAT WE
FOUND LEADING TO THIS HUGE PRICE
INCREASE WAS ACTUALLY THE
LENDING PRACTICES BY THE BANKS
AND BY THE INDIVIDUALS WHO WERE
LENDING MONEY TO THE PEOPLE THAT
WERE BUYING MEDALLIONS.
>> LET ME GO BACK TO SOME OF THE
THINGS THAT YOU MENTIONED HERE.
IT REMIND ME OF MY DAYS AS A
PROSECUTOR AND A DEFENSE
ATTORNEY WHERE I WAS INVOLVED IN
A NUMBER OF CASES THAT HAD TO DO
WITH STOCK FRAUD.
AND WHAT YOU DESCRIBE IN THE
ARTICLE IN MANY WAYS SOUNDS LIKE
A CLASSIC STOCK MANIPULATION.
SO HLET'S START OFF WITH THE
CITY.
WHY DID THE CITY DECIDE WE WERE
GOING TO PUT MORE OF THEM ON THE
MARKET HERE?
JUST TO MAKE MONEY FOR THE CITY?
>> AT THE TIME, THIS STARTED IN
2004 UNDER FORMER MAYOR
BLOOMBERG.
AT THE TIME HE SAID THAT THE
CITY WAS GROWING, MORE PEOPLE
NEEDED MORE CABS.
BUT WE FOUND THAT AT THE TIME HE
HAD A $3.8 BILLION BUDGET GAP.
AND THIS WAS ONE OF THE WAYS
THAT HE WAS TRYING TO FIX IT.
>> YOU MENTIONED THE CITY.
I REMEMBER SOME OF THESE ADS.
AGAIN, LOOKING AT SOME PARALLELS
TO THE STOCK MARKET, SOME OF
THEM REMINDED ME OF WHEN YOU HAD
COMPANIES THAT ARE GOING TO GO
PUBLIC AND THEY'RE OUT ON THEIR
DOG AND PONY SHOWS PITCHING THIS
SAYING THIS IS A GREAT
INVESTMENT, BETTER THAN OTHER
THINGS ON THE STOCK MARKET.
HOW SURPRISING WAS IT TO FIND
THAT THE CITY'S OUT THERE
ADVERTISING TO PEOPLE, THIS IS
BETTER THAN THE STOCK MARKET?
>> IT WAS VERY SURPRISING.
THINK ABOUT IT.
THIS IS THE REGULATORY AGENCY.
I MEAN, IT'S AKIN TO THE
REGULATORY AGENCY THAT OVERSEES,
YOU KNOW, McDONALD'S TALKING
ABOUT HOW GREAT McDONALD'S
HAMBURGERS ARE.
I MEAN, IT WAS A VERY UNUSUAL
POSITION FOR THE CITY TO BE IN.
THERE WAS DISCOMFORT EVEN WITHIN
THE CITY AGENCY IN WHAT THEY
WERE DOING.
A LOT OF PEOPLE FELT THIS WASN'T
THE RIGHT THING FOR THE CITY TO
BE DOING, BUT THEY KEPT DOING IT
ANYWAY.
>> UNDERSTANDING WHAT YOU
OUTLINED IN TERMS OF SOME PEOPLE
DRIVING UP THE PRICE OF THESE
FOR THEIR OWN BENEFIT, I'M SURE
FOLKS WHO READ YOUR ARTICLE AND
LISTENING TO OUR CONVERSATION
HERE NOW SAYING, I'M NOT
UNSYMPATHETIC TOWARD THE FOLKS
THAT WENT OUT AND BOUGHT THESE
MEDALLIONS, BUT THE BOTTOM LINE
SHOULD HAVE BEEN IF THEY LOOK
AND THEY SEE THAT IT USED TO BE
$100,000 AND NOW IT'S OVER A
MILLION DOLLARS AND THE COST OF
RIDING IN A CAR IS NOT GOING UP
THAT DRAMATICALLY, THAT WAS JUST
A BAD ECONOMIC DECISION FOR
THEM.
SO WHAT ARE THE ADVOCATES FOR
THE DRIVERS SAYING IN RESPONSE
TO THAT SUGGESTION, LOOK, IT'S
TERRIBLE THAT YOU'RE IN THE
SITUATION, BUT YOU JUST MADE A
BAD DECISION?
>> SO IT'S ABSOLUTELY TRUE THESE
DRIVER OWNERS MADE A BAD
DECISION BUT I THINK IT'S
IMPORTANT TO REMEMBER THE
CONTEXT.
90% OF TAXI DRIVERS IN NEW YORK
CITY WERE NOT BORN IN THE UNITED
STATES.
THEY CAME OVER TRYING TO ACHIEVE
THE AMERICAN DREAM.
THEY CAME INTO A SYSTEM IN WHICH
THEY WERE TOLD THAT THE WAY TO
ACHIEVE THE AMERICAN DREAM IS TO
BUY A MEDALLION AND THEY WERE
TOLD BY THE CITY THIS WAS A PATH
TO A WORRY FREE RETIREMENT.
>> THIS WASN'T JUST LENDERS OUT
THERE PUMPING UP.
>> RIGHT.
>> BUT IT WAS ALSO THE CITY OF
NEW YORK SAYING BETTER THAN THE
STOCK MARKET.
>> CORRECT.
AS THE BUBBLE WAS REACHING ITS
PEAK, A LOT OF PEOPLE SELLING
THE MEDALLIONS AND LENDING THE
MONEY WERE ACTUALLY FLEET OWNERS
WHO WERE SELLING MEDALLIONS TO
THEIR OWN DRIVERS.
THAT'S BASICALLY YOUR BOSS
COMING TO YOU WITH A BUSINESS
OPPORTUNITY.
YOU HAVE A LEVEL OF TRUST IN
THAT PERSON AND SO YOU'RE MORE
LIKELY TO AGREE TO THE DEAL THAT
HE IS PROPOSING.
>> OBVIOUSLY YOUR REPORTING IN
THE "NEW YORK TIMES" HAS GOTTEN
A LOT OF ATTENTION HERE.
WE'VE HEARD NOW SOME OFFICIALS
SAYING WE WANT TO TAKE A GOOD
HARD LOOK AT THIS.
WHAT IS TAKING A GOOD HARD LOOK
MEAN IN TERMS OF ANYTHING THAT
COULD BE HELPFUL FOR THESE FOLKS
THAT FIND THEMSELVES UNDERWATER
IN TERMS OF THE MONEY THEY
BORROW?
>> IT'S A GOOD QUESTION.
ONE OF THE COMPLICATIONS HERE IS
THAT WE DID NOT FIND THAT
ANYTHING THAT THE HENLENDERS AN
THE PEOPLE IN THE INDUSTRY WERE
DOING WAS NECESSARILY ILLEGAL.
>> IT MAY WELL HAVE BEEN
UNETHICAL OR IMMORAL BUT YOU
DIDN'T FIND THERE WAS ILLEGAL
CONDUCT TAKING PLACE.
>> NOT NECESSARILY, YES.
AND ONE OF THE REASONS FOR THAT
IS THAT THESE LENDERS CLASSIFIED
THESE LOANS AS BUSINESS LOANS,
WHICH IN SOME WAYS THEY ARE.
DRIVING A TAXI IS A BUSINESS.
BUT THEY WERE IN MANY WAYS
PERSONAL LOANS BECAUSE IT IS ONE
PERSON.
>> IT'S A BUSINESS BUT THE BY
WAS THE ONE PERSON.
>> RIGHT.
ALSO THEY HAD TO GUARANTEE THE
LOAN WITH ALL OF THEIR PERSONAL
ASSETS AS A CONDITION OF THE
LOAN.
THE FACT THAT THEY CLASSIFIED IT
AS BUSINESS LOANS MEANS THERE
ARE A LOT FEWER RULES AROUND
THOSE LOANS.
IN TERMS OF WHAT'S GOING TO
HAPPEN NOW, THERE ARE
INVESTIGATIONS.
WE DON'T KNOW WHAT THEY'LL FIND.
THE REAL PROBLEM NOW IS THAT
THERE ARE THOUSANDS OF DRIVER
OWNERS WHO ARE WAY UNDERWATER ON
THEIR LOANS AND TO BAIL THEM OUT
WOULD COST AN INCREDIBLE AMOUNT
OF MONEY.
>> AS I MENTIONED BEFORE, IT WAS
MARVELOUS REPORTING, SUCH A
GREAT INDEPTH LOOK AT A
DIFFICULT PROBLEM THAT MOST
PEOPLE DIDN'T REALIZE EXISTED.
CONGRATULATIONS TO YOU AND YOUR
COLLEAGUES AT THE "NEW YORK
TIMES" FOR DOING A REALLY GOOD
JOB ON THIS.
>> THANK YOU.
>> TO FIND OUT WHERE YOU CAN
READ THE FULL REPORT BY THE "NEW
YORK TIMES" VISIT US AT
METROFOCUS.ORG.

Funders

MetroFocus is made possible by James and Merryl Tisch, Sue and Edgar Wachenheim III, the Sylvia A. and Simon B. Poyta Programming Endowment to Fight Anti-Semitism, Bernard and Irene Schwartz, Rosalind P. Walter, Barbara Hope Zuckerberg, Jody and John Arnhold, the Cheryl and Philip Milstein Family, Janet Prindle Seidler, Judy and Josh Weston and the Dr. Robert C. and Tina Sohn Foundation.

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