TAXI CAB BROKEN DREAMS

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. 

TRANSCRIPT

> 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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