nicolae hent

We have to move a little ahead because they already told me to move because it’s a hotel.

michael barbaro

O.K., let’s get in.

nicolae hent

O.K.

michael barbaro

Do you mind if we get in the back?

[music]

nicolae hent

O.K.

michael barbaro

Last year — Nicolae —

nicolae hent

Yes?

michael barbaro

Thank you for letting us in your cab.

nicolae hent

Why not?

michael barbaro

We met New York City taxi driver Nicolae Hent. What is the medallion system? That’s the number on the hood. The medallion is your right to —

nicolae hent

To hail in New York City.

michael barbaro

And spoke to him about how major changes inside of his industry — Without that, you’re not a taxi?

nicolae hent

No.

michael barbaro

— were leading thousands of drivers like him into massive debt.

nicolae hent

If the city of New York likes more Uber and Lyft or app cars, O.K., come to the table, make a deal with the yellow taxi medallion owners, and arrange them a settlement. Don’t turn your back at me after you sold me the exclusivity rights. I want that back.

michael barbaro

You’re arguing the city — the regulators have betrayed you because you bought what you believe was an exclusive right to pick up passengers —

nicolae hent

Exactly.

michael barbaro

and they actually let everybody else have that same right without paying what you paid —

nicolae hent

Exactly.

michael barbaro

— and so the contract has been broken?

nicolae hent

Yes.

michael barbaro

Would you tell me a little bit about your friend Nicanor?

nicolae hent

Nicanor Ochisor.

michael barbaro

Nicanor.

nicolae hent

Yeah. We call him nickname Norelle.

michael barbaro

In some cases, these drivers were taking their own lives.

nicolae hent

Poor Norelle, he hanged himself.

michael barbaro

In the past year, even as more regulations on apps like Uber and Lyft have gone into effect, drivers have continued to fall into debt. Today, our colleague Brian Rosenthal explains that the rush to blame these apps actually shielded the real culprits behind this crisis.

archived recording 1 But as The New York Times reports, companies like Uber and Lyft aren’t entirely to blame. Many drivers were actually the victims of the industry leaders who pushed them into reckless loans while pocketing millions.

michael barbaro

It’s Tuesday, May 28. Brian, when did you start looking into the taxi industry?

brian rosenthal

So I started looking into the taxi industry at around the same time as the suicides last spring but for a very different reason. I started actually through Michael Cohen, President Trump’s former lawyer. Remember, last April his office and his home was raided by the F.B.I. And after that happened, The Times assigned five reporters to find out more about him, and we basically divided up his life. Somebody looked at his family. Somebody looked at his legal career. Somebody looked at his real estate. And I was left with the last major piece of his business interests, which was his investment in 30 New York City taxi medallions. In doing the reporting about his investment, what I learned was that the price of a medallion had fallen from $1 million down to $200,000 or less.

michael barbaro

Right, this kind of historic plunge.

brian rosenthal

Right. And what really struck me was something very different. It was why had it ever cost a million dollars to buy a taxi medallion in the first place? Why would it ever cost a million dollars for a permit to operate a taxi, and why would anybody give a loan to somebody for that amount of money in order to buy it? It just didn’t make a lot of sense to me.

michael barbaro

And so you start reporting to answer those questions.

brian rosenthal

Right. And I started by going back and looking into this medallion. You know, the taxi medallion is a creation of New York City back in 1937.

[music]

archived recording 1 Taxi. Taxi!

brian rosenthal

There were cabs that were unlicensed that were on the streets crowding the streets. There was chaos in the streets, apparently. I was not there. At the time, they decided that they wanted to limit the number of cabs on the road, and in order to control that chaos, they issued about 12,000 of these medallions. And they decided to split up the medallions. About half of them were fleet medallions that could be held by large fleets, businesses that controlled hundreds of cabs, and the other half were required to be owned by drivers. That 6,000 had to be owned by the person that was actually driving the cab.

michael barbaro

The kind of classic taxi driver we think of who owns his own car.

brian rosenthal

That’s right, and that’s the group that we focused on.

michael barbaro

And what do you learn about medallions?

brian rosenthal

So over time this medallion, which was initially sold for $10 by the city, started growing in value. It started being seen not just as a permit but a financial asset. I mean, it’s worth more than $10.

michael barbaro

For sure.

brian rosenthal

You’ve got the ability to pick people up and make some money off of it. So people started to realize that.

[music]

brian rosenthal

So starting in the early 2000s, that steady increase in the medallion price starts accelerating.

archived recording 1 Corporate taxi medallions increasing 1,000 percent from their average price of $50,000 in 1980 according to The New York Post.

brian rosenthal

And you see the value going up really fast —

archived recording 2 Are you ready? How much do you think it is?

brian rosenthal

— from $200,000 to $300,000, $400,000, $500,000.

archived recording 3 The record now stands at $766,000.

brian rosenthal

It’s doubling, basically, every year.

archived recording 4 It might not look like much, a cheap aluminum medallion riveted to each and every New York City taxi.

brian rosenthal

And then eventually —

archived recording 5 but the value of this piece of metal has just reached a dizzying million dollars.

brian rosenthal

It hits a million.

michael barbaro

I remember this because as that happened, I just moved to New York, and there were lots of stories about this, that you could be in a cab and your driver, he actually was worth 20 times more than you because he had bought a taxi medallion a long time ago and he was your millionaire taxi driver.

brian rosenthal

That’s right, yeah. I mean, on paper he or she was a millionaire.

michael barbaro

And what explains this rapid growth in the value of the taxi medallions after years of this kind of steady growth?

brian rosenthal

It really started around the city auctions. Starting in 2004, the city of New York started auctioning off a thousand new medallions. And the idea was that, you know, the population has grown, so the city needs more cabs. And there were people in the industry who see that auction happening and see a real opportunity to make a lot of money. There were people who already own a lot of medallions who realize that if they go to the auction and they bid some crazy number, overpay for one medallion, then other people are going to think a medallion is worth that amount, and so lots of medallions that they already own are going to be seen as worth a lot of money.

michael barbaro

They’re bidding up the market.

brian rosenthal

Right. So that is happening. At the same time the city, through these auctions, is trying to make money off the medallions. They had, when they started these auctions, a $3.8 billion budget hole that they were trying to fill.

michael barbaro

And this was going to help them?

brian rosenthal

This was going to be a major way to help close that budget gap. And so they start taking out advertisements.

archived recording 1 What’s better than driving a cab? Its owning a cab. archived recording 2 I’m my own boss, and I’m in charge of my future.

brian rosenthal

They create this idea that a medallion is this magical asset that’s going to make you rich —

archived recording 3 A medallion gives you the right to own and operate your very own taxi and is often seen as a great investment.

brian rosenthal

Saying that medallions are better than the stock market —

archived recording 4 Deciding to own a cab was the best decision I ever made.

brian rosenthal

That they are a path to a worry-free retirement.

archived recording 5 Visit us online at NYC.gov or dial 311 for more information on this once in a lifetime opportunity.

michael barbaro

And I have to think that a message like that from the city feels very credible because why would New York City misrepresent what it means to own a medallion?

brian rosenthal

Right. And so that had a significant impact on the price. But the biggest thing that we found that caused this spike in the medallion price was a change in the lending practices by the banks and by the unregulated individuals who were lending the money to medallion buyers.

michael barbaro

And what were those changes?

brian rosenthal

I think the clearest way that you can look at it is the down payment. So it used to be that if you wanted to buy a taxi medallion, you had to put down a down payment of 40 percent, and then it became 30 percent, and then it became 20 percent, and then it became 10 percent, and then it became —

archived recording 1 Some of these folks offering 0 percent down.

brian rosenthal

Nothing.

archived recording 2 You tell me what bank, you know, walks around asking for 0 percent down on a loan? It’s just — it’s really amazing, and it’s a testament to the strength of the medallion.

brian rosenthal

By 2013, most people were not putting a down payment down.

archived recording 3 You know, this is important. When you talk about the American dream and how a medallion could be the American dream — people have put their kids through college using the equity that they built up in their medallion as collateral for other loans. I don’t think anyone can deny that people making their lives better when they come to this country is a good thing.

brian rosenthal

The income that was required of the buyer, the credit score that was required, the down payment that was required, all of these were loosened.

michael barbaro

So this obviously sounds like a mirror image of what had happened to the housing market.

brian rosenthal

It’s very similar. And the other similarity is not just in the lending standards but also the terms of the loans that you see. You see a lot of these balloon loans.

michael barbaro

Where the big, big payments come much later.

brian rosenthal

Right. It’s a favorable rate at first, but it’s going to really cost you later. You see loans with a lot of fees that seem designed to make a commission or a fee for the broker. And the other similarity that we found to the real estate crisis is that it was literally the same lenders, in many cases. It was many lenders who had helped cause the crash in the housing market then needed a new place to take their business so they can make their profits, and they saw the taxi medallion industry as someplace where they could do that.

michael barbaro

One thing, Brian, that we all learned when the housing bubble burst in the mid-2000s was that a lot of borrowers didn’t really understand the terms of the loans that they were given. Did you also find that was the case here?

brian rosenthal

Yes. So I and the other reporters that I worked on with this talked to 200 taxi medallion driver-owners, and what we found in talking to them was that, for the vast majority of them, they had no idea what the terms of the loan was that they had signed. In many cases I sat down with them and looked at their loan with them. And the other thing to keep in mind is just the fact of this population. New York City taxi drivers, 91 percent of them were not born in the United States. I had a lot of these conversations through translators because a lot of the people that bought medallions did not speak English fluently, and they really just had no way of understanding the language that was on the page in front of them. And so that very fact allowed the industry leaders to really take advantage of these people.

michael barbaro

I’m sure lots of people will also think that these drivers, regardless of their circumstances and their language skills, should have read the fine print. They should have known what they were getting themselves into, especially when you’re taking out a loan of that size.

brian rosenthal

It’s true. They should have read the fine print.

[music]

michael barbaro

So how does this all end up playing out? When does this bubble burst?

brian rosenthal

So we get to the beginning of 2014. The prices have passed a million dollars. The city decides to hold one more auction —

archived recording 1 Hello, and thank you for attending today’s taxi medallion auction.

brian rosenthal

Where they sell 150 medallions to driver-owners at prices of about a million dollars.

archived recording 2 Bid number 50, Jornal Singh, $750,000.

brian rosenthal

And then shortly after that the prices suddenly start to crash.

archived recording 3 The average price of a single New York taxi medallion has fallen about 20 percent since peaking in 2013. archived recording 4 As the value of those taxi medallions keeps plummeting — archived recording 5 So that’s down 17 percent from the spring of last year.

michael barbaro

And what caused that?

brian rosenthal

So if you were to ask anybody in the industry or in the government, what they would say is that —

archived recording 6 The culprit hurting not only cabbies but now lenders is so obvious — Uber.

brian rosenthal

What caused the prices to go down is ride hailing —

archived recording 7 The New York Times reports taxi medallion prices are tumbling across the country as online car services like Uber and Lyft compete for rides.

brian rosenthal

Uber and Lyft coming into the city and providing more competition, making it harder for cab drivers to make a living.

michael barbaro

I would cite that as a big reason.

brian rosenthal

Right. Unfortunately, it’s just not really true.

michael barbaro

We’ll be right back.

brian rosenthal

If you look at the numbers, taxis in New York City have been protected from Uber and Lyft because 97 percent of taxi rides in New York City start either in the core of Manhattan or at the airports, and those are areas where Uber and Lyft are just not as popular. Uber and Lyft, most of their rides start in the outer boroughs.

michael barbaro

The Bronx, Brooklyn, Queens.

brian rosenthal

That’s right, yeah. So if you look at the actual numbers on a per-cab basis of what the revenue is today versus before ride hailing came, it’s only about a 10 percent reduction.

michael barbaro

So Uber and Lyft have done 10 percent damage to the taxi industry?

brian rosenthal

That’s right.

michael barbaro

You’re saying that does not explain why medallion values suddenly went from a million to 20 percent of that value.

brian rosenthal

No, it doesn’t. The bubble burst, quite simply. The prices got to a point where the loans were completely unsustainable. By the height of the bubble, on average, a taxi medallion owner in New York City was making about $5,000 a month and had to pay about $4,500 of that to the bank. And the only way that they could survive was if the medallion value continued to go up, and so then they could refinance at a higher rate and take money out and then use that money to make their monthly payments. But at that point when it hit a million dollars, the values just literally could not go any higher. It just became impossible to make a living, and that’s what leads the bubble to burst.

michael barbaro

I want to make sure I understand this though because you’re saying the minute that people realize that the medallion value is inflated — is around the same time that Uber and Lyft are in town, and they’re clearly offering this competition, but that timing can’t just be coincidental.

brian rosenthal

No, it’s not coincidental, and we didn’t find that Uber and Lyft had no impact. What we found was that the market was already unsustainable and inflated and unstable, so even that small revenue reduction that we were just talking about, the 10 percent, because it was already unstable, that 10 percent reduction led the whole house of cards to collapse.

michael barbaro

That tips it over.

brian rosenthal

That’s right.

michael barbaro

Which tells you that there’s a pretty deep rot in the system. Because as we know from working in the newspaper industry, industries take 10 percent hits now and then.

brian rosenthal

Right. A normal industry can withstand that. We interviewed 450 people as part of this story. We talked to a lot of industry fleet owners and bankers and brokers and lawyers. And they basically all agreed that in retrospect when you look at the numbers, even if Uber and Lyft had never been invented we would still be having a crisis in the New York City taxi industry today —

michael barbaro

Wow.

brian rosenthal

That’s almost the same.

michael barbaro

That’s a stunning fact, because we have all invested a tremendous amount of energy and time to thinking about these ride-hailing apps as the fundamental problem and trigger of all this.

brian rosenthal

Yeah. Well, we’re not trying to let them off the hook. We’re not Uber apologists here. Uber and Lyft have their own problematic practices that we’ve reported about. But in this case, that was not the fundamental cause of this crisis.

michael barbaro

So your point, if I’m a medallion owner now, a driver who bought my medallion when the value was severely inflated, what exactly is my situation? What’s the state of things for me right now?

brian rosenthal

So now you are making 10 percent less money. You have an asset that is worth about $200,000, and you probably owe the bank close to a million dollars. And what’s even worse is that because a lot of these loans were balloon loans, borrowers are extremely vulnerable to the banks who now just want to get out. They just want to get out of this business, and they have the power to do basically whatever they want because what the piece of paper says is that the borrower is in default, and so the bank can come after them, take their house. You know, they have obtained, in many cases, judgments that allow them to take their paycheck. Because of the way that the loans were signed, the banks have all the power right now, and they’re using it.

michael barbaro

How many of the 200 or so drivers that you have spoken to were despondent about the situation that they’re in?

brian rosenthal

Almost all of them. I mean, I don’t want to be too dramatic about it, but we talked to owner after owner who not only felt demoralized about what was going on, but felt some deep depression about what was happening. One owner that I spoke with, I just asked him if he was thinking about filing for bankruptcy, like a lot of these medallion owners had, and his response was actually to go to the suicides. He brought up himself that he was not going to kill himself because of his family, because of his wife, because of his daughter.

michael barbaro

You asked him, are you going to be filing for bankruptcy, and his head went to suicide?

brian rosenthal

Immediately.

[music]

michael barbaro

Brian, since your reporting emerged on this, there’s been a lot of talk about big changes that could come to the industry, and I wonder if you think those changes will actually happen.

brian rosenthal

It’s possible.

archived recording 1 In response to The Times report, Mayor Bill de Blasio said Monday the city would launch an investigation into the predatory practices of taxi medallion brokers.

brian rosenthal

The mayor of New York City has said that he’s going to investigate the brokers.

archived recording 2 New York State Attorney General Letitia James announced her office is also initiating an investigation.

brian rosenthal

The Senate minority leader, Chuck Schumer, has called for a federal investigation of some of the lending practices, and there are even some bills being drafted about a potential bailout. But the problem is that there is a lot of money here that is still owed to the banks, and if the government is going to do something about it, it’s going to be tremendously expensive.

michael barbaro

What do you mean?

brian rosenthal

If you look at the different people involved in this industry, the city government has done very well. They made more than $855 million selling medallions, and they’ve taken that money. They’ve spent it. They’re fine. The brokers made a lot of money in commissions and fees, and they’re fine. And at the end of the day, the people who actually issued those loans in the banks made hundreds of millions of dollars. The only people that are really, really suffering now are the individuals who bought medallions in this period. I mean, we have 6,000 medallion owner drivers. The vast majority of them owe the bank $500,000 or more. Right there, that’s $3 billion, and the government does not have $3 billion sitting around. It does, but it’s not going to spend it on this. And so there are all these good intentions right now, and there probably will be legislation that cracks down on some of the practices that we found out about, and there may even be some people punished because of what they did, but the bottom line is there are still going to be taxi medallion owner-drivers who are going to be deep in debt no matter what —

[music]

brian rosenthal

who were trying to achieve the American dream and ended up deeply in debt and unable to get out of it. And that’s the situation they’re in now.

michael barbaro

Brian, thank you very much.

brian rosenthal

Thank you.

archived recording 1 No more. archived recording 2 No more suicides. archived recording 3 No more bankruptcy. archived recording 4 No more bankruptcy. archived recording 5 No more suicide. archived recording 6 No more suicide. archived recording 7 No more bankruptcy. archived recording 8 No more bankruptcy.

nicolae hent

Hello?

michael barbaro

Hey, Nikolae, it’s Michael Barbaro from The New York Times. How are you?

nicolae hent

I am O.K. I am in J.F.K. waiting for your call.

michael barbaro

It’s good to hear your voice again.

nicolae hent

O.K. Good to hear your voice, too.

michael barbaro

Tell me what you were thinking when you saw this reporting from my colleague, Brian Rosenthal, over the weekend. What were you thinking when you digested that?

nicolae hent

O.K., I read it twice, that report, and last night I read it again just to make sure I do understand. Now I see what I’ve been through, and I see how difficult it was for me and how difficult it was for other fellow cab drivers which they didn’t speak English like me, and probably they didn’t know to do the math like I did. Many of my friends, they were robbed badly, much more worse than they did with me. Because always when I did something, I consulted somebody which had more experience and which had the better English. It’s not fair to rob these people in such a way. And all the politicians, they knew what’s going on.

michael barbaro

When I read this investigation, it reminded me of my conversation with you. And you had explained that there was a failure in anticipating what Uber and Lyft and all those competitors would do to your industry, that there was a failure to understand that and to stop it. And it feels like now I understand that it’s much more complicated than just what’s happened in the last few years with all these ride-hailing apps, that the failures start earlier and it’s bigger than that.

nicolae hent

You know, I put it this way. They could not finish us with their loans, but they are finishing us now with the app because they allowed those apps to come into the business with free license. It’s impossible. Mr. Barbaro, it’s impossible for me to compete with those people when I have to pay $19,000 a year for my mortgage, which I am not in a bad shape. And last year when I talked with you I told you I have $130,000 something, $134,000 I believe. Now I have $123,000. But now I have to buy a car.

michael barbaro

Right, because of the regulations.

nicolae hent

So another $30,000.

michael barbaro

So you’re saying that Uber and its competitors and the damage that that inflicts, that’s the end of this process, but it’s not the beginning of the problem.

nicolae hent

That would be the end of this process. That will be the end of this process. This is what I always said. Competition should be fair and square. If they sell me a license with a million, O.K., sell Uber a license with a million. Then the competition is fair.

michael barbaro

I want to ask you, last time that I spoke with you your best friend Nicanor had recently taken his life, and the understanding was that it was because he had become overwhelmed and distraught by the situation that we’re laying out here. And I wonder what you’re thinking about the experience of what happened to him now that you have read this story and absorbed everything in it.

nicolae hent

I put it this — [INAUDIBLE] he was my friend, was my best friend. I told you the story. He would be alive now probably. He never thought something will happen. He said, in all words of telling me. We are screwed. We lost everything we had. That’s why he think he said the words fuck this life, you know, and did the work he did.

michael barbaro

He didn’t think anything was going to change?

nicolae hent

No, he didn’t think — will not change, no, 100 percent. But honestly, I am thinking now — I just told my wife this morning. Don’t even think or hope you’ll get some money from this, some help. Better don’t think that way because we’ll see what happens. But because we opened the eyes to so many people, something must happen. That’s what I told my wife. They have to do something. I don’t know how they’ll go do. You want to take the medallions back? I’ll give it to you tomorrow morning, but give me the money. Or if you don’t have the money, the medallion was my pension. Give me a pension for the rest of my life.

michael barbaro

I was going to say, kind of in short, what is your message for the city? What do you want them to hear?

nicolae hent

Mr. de Blasio, Mr. Governor Cuomo, city officials, former Mayor Bloomberg, I think it’s time to come together and fix the problem what you create. You still have a chance to fix it. I don’t know if you have the willingness to fix it, but it’s time to fix it.

michael barbaro

Well, I really want to thank you again, Nicolae, and I wish you good luck today.

nicolae hent

Well, thank you very, very much Michael, and God bless you all, O.K. Bye-bye.

[music]

michael barbaro

Here’s what else you need to know today. After four days of voting for seats in the European Parliament, populist and nationalist candidates who want to chip away at the powers of the European Union won seats in Britain, Italy and France, but their victories were not as widespread as E.U. officials and supporters had feared.

archived recording (marine le pen) [SPEAKING FRENCH] I see a victory for the people who with pride and dignity took back the power tonight. We welcome the result because the name National Rally has never been a more suitable name.

michael barbaro

The most immediate impact of the elections may be on domestic politics. In France, the slate of candidates supported by President Emmanuel Macron, an outspoken supporter of the E.U., was defeated by candidates backed by Marine Le Pen, a far-right figure and vocal critic of the E.U. That could weaken Macron’s standing at home.

archived recording (marine le pen) [SPEAKING FRENCH] Taking into account the democratic rejection suffered by the authorities, it will be up to the president to draw the necessary conclusions — he who put his credibility in this vote, making it a referendum on his policies and even on his person.

michael barbaro