Comment by bko | Hacker News Reader

Comment by bko | Hacker News Reader

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> finance industry just ran roughshod over them

I don't see how "the finance industry" hurt these drivers. These drivers were required to buy a license for up to $1mm for the right to drive people in taxis. Obviously that's a lot to put up, so banks lent them money to purchase it much like they do for people trying to finance houses, automobiles, boats, or any other high ticket item.

I wish the article would actually spell out the terms of the loans rather than relying so much on personal accounts of people involved. The author seems to take issue with interest only loans or long term loans, but mentions how the drivers can barely afford the payments. I don't see how they would be able to afford shorter term loans.

I imagine many drivers are going to rightly walk away from these loans, and considering many are interest only, the borrower is pretty much on the hook for the loss in value. The article does mention some fees or debt collectors but I believe they can just walk away and default. Might hurt their credit but its better than the alternative.

Whenever you have situations defined by some financial fuckery (or “innovation”), you end up with “unanticipated consequences” that your grandma could anticipate.

Anything can be collateralized, including things that don’t have stable value. In our quest to provide stimulus, fiscal policy has made capital so cheap that all sorts of dumb things are possible.

There’s no scenario where some dude off the boat from Pakistan or Haiti without assets should be able to borrow $1M for the right to drive a single cab. This story makes the exploitive and scummy Uber/Lyft business model seem ok in comparison.

> Anything can be collateralized, including things that don’t have stable value

The article doesn't mention collateralization so I don't see your point. There is collateral in that the person is using a loan to buy a valuable item, so that item is used as collateral.

> There’s no scenario where some dude off the boat from Pakistan or Haiti without assets should be able to borrow $1M for the right to drive a single cab. This story makes the exploitive and scummy Uber/Lyft business model seem ok in comparison.

Do you suggest limiting loans to only dudes that aren't "off the boat"? Again, it's not in the banks interest to lend to these borrowers if they have no intention of paying it back or at an asset value that will fall.

It's unfortunate that there is artificial scarcity for these medallions that resulted absurd market values. But most businesses require some sort of financing. Few business owners have liquid capital they can use to get their business up and running. This is especially true for many entrepreneurial immigrants coming to this country.

> Do you suggest limiting loans to only dudes that aren't "off the boat"?

I suggest that with a revenue + collateral based loan, you should write loans that the borrowers can understand and pay back. The off the boat folks don’t have the financial awareness or education to understand what’s happening. Their willingness to work as hard as necessary is exploited.

Read the article. It’s absolutely in the interest of the lender to write a non-performing loan, because they make money off of the fees or can sell the obligation to some other entity or seize the medallion.

What is exploitive about uber/lyft?

They pay drivers less than the operating cost of the car.

Basically, drivers exchange quick cash for accelerated burn of the value of their vehicle.

I assume filing for bankruptcy means the lender gets to claim the medallion and sell it? That means losing potentially hundreds of thousands in payments already made, as well as the loss of any source of income. I think renting a medallion is possible at that point, but many of these medallion owners seem to have invested their life savings and could be nearing retirement.

Yes, that's true, but considering that many of the loans were interest only or very long term, the driver did not sink much into the principal. It's kind of weird that the author is so critical of these types of loans when they are very beneficial if the asset value dropped a lot, since now the lender is stuck holding the bag.

Well maybe people shouldn't be investing their life savings in a single asset...

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