The Taxi Medallion Bubble

The New York Times has a long, detailed and very sad look at the implosion of the taxi medallion business. A lot of cab drivers, many of who are immigrants, were ruined. There’s been a spate of suicides as well.

One of our stocks, Signature Bank (SBNY), played a big role in this market. However, I think the bank behaved responsibly, for the most part. You can’t easily blame a bubble on the banks. The rise of ride-sharing apps played a role as well.

Here’s a quote from a Signature executive:

Walter Rabin, who led Capital One’s medallion lending division between 2007 and 2012 and has led Signature Bank’s medallion lending division since, said he was one of the industry’s most conservative lenders. He said he could not speak for the brokers and fleet owners with whom he worked.

Mr. Rabin and other Signature executives denied fault for the market collapse and blamed the city for allowing ride-hail companies to enter with little regulation. “It’s the City of New York that took the biggest advantage of the drivers,” said Joseph J. DePaolo, the president and chief executive of Signature. “It’s not the banks.”

That’s correct. The city deserves a lot of blame.

Some lenders, especially Signature Bank, have let borrowers out of their loans for one-time payments of about $250,000. But to get that money, drivers have had to find new loans. Mr. Greenbaum, a fleet owner, has provided many of those loans, sometimes at interest rates of up to 15 percent, loan documents and interviews showed.

The stock had been sinking over the past two weeks, perhaps in anticipation of a hit job. I think SBNY came out well.

Posted by on May 20th, 2019 at 8:44 am


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