Taxi medallions in New York City rose sharply in price and eager but ignorant buyers borrowed money to pay the price. They couldn't afford to repay the loans and medallion prices fell. As the author of two stories (links follow) from the New York Times notes, it was similar to the mortgage and housing bubble and collapse during the previous decade.
How
Reckless Loans Devastated a Generation of Taxi Drivers
As
Drivers Were Trapped in Loans, Top Officials Counted the Money
The first focuses on the medallion buyers, the second on the lenders and regulators. Two quotes from the second one:
- "banks were increasing profits by steering cabbies into risky loans"
- "a niche banking system had grown up around the taxi industry, and at its center were about half a dozen nonprofit credit unions that specialized in medallion loans"
It's easy enough to understand the lenders were doing well before the loans went bad. But what happened to the banks' profitability after the loans went bad? Is that not newsworthy? Maybe that story fails to satisfy their motto: "All the News That's Fit to Print." 😉
There is plenty of government behaving badly in the story. Again the regulators were "asleep at the wheel." Regulation often isn't the cure that its advocates portray it to be. Also, the city government took in a lot of money selling the medallions.
"History does not repeat itself, but it rhymes." -- Mark Twain, allegedly.
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