A New York City monopolist wants a taxi bailout because he is too big to fail.
The great news here is that innovative technology led to legal loopholes that, for the first time in ages, brought competition to the taxi monopoly. As a result, we are about to see our first major failure of the old business.
Thus, the New York Times reports,
A medallion’s value is determined by the expectation of future taxi revenue. The real income generated by medallions is affected by competition from Uber, and also by the expansion of the city’s green cab program, which created a new class of vehicles that picks up street-hailing passengers outside Manhattan.
As Mr. Freidman himself noted, he is no longer able to charge the city’s legal maximum lease rate for yellow cabs because fewer people are interested in driving them; this is a fundamental reason prices are declining.
So because consumers now have options, they can demand lower prices from traditional taxi services, or else decide to forego taxi services altogether.
One of New York City’s largest taxi fleet owners is asking for a bailout.
Evgeny Freidman, known as Gene, said in an interview Thursday that the taxi industry, like the financial industry, was too big to fail. He would like the city to guarantee taxi medallion loans, which would induce banks to extend more credit to fleet owners like him, and he compares this approach to the federal government’s actions to save large banks and insurers in 2008.
“I still see Bernanke saying, ‘I hate A.I.G.; I don’t want to give them any more money, but I have to,’ ” he said, referring to the former Federal Reserve chairman Ben Bernanke and the large insurer that was bailed out in 2008.
Mr. Freidman’s problem is not unlike that of any homeowner who bought real estate in the early part of the century thinking prices could only go up. In New York, medallions, the license that is required to operate a yellow taxi, are fixed in number, and their price rose for decades because of increased demand and restricted supply.
So now, Freidman has found he can no longer take out loans to buy medallions. In fact, he is in court with Citibank, which is claiming 87 medallions as repayment for loans that are due. He claims that if he goes bankrupt, the value of medallions across the country will crash.
We don’t need a monopoly taxi business. We never needed such a business. It was nothing but an exploitation of riders. The fact that groups like Uber and Lyft are causing business disruption to a city monopoly taxi business is wonderful news!
Consumers create demand for services and the market endeavors to meet that demand. There was never any reason for the government to be involved in that process in the case of taxi service. In fact, the only reason the government got involved was so that it could extract revenue.