Uber definitely has its issues but we should nonetheless be happy that it’s opened up some more competition for personal transportation services. Many taxi moguls, however, are not pleased by the additional competition since it’s cut into their profits by considerable sums. However, we don’t think we’ve ever heard any of them go as far as Evgeny Freidman, a taxi fleet owner who told The New York Times recently that he’s deserving of an AIG-style government bailout.
“I still see Bernanke saying, ‘I hate A.I.G.; I don’t want to give them any more money, but I have to,'” Friedman told the Times in explaining why he thinks he’s worth of being bailed out by the city government.
What would such a bailout entail? Essentially, Friedman is trying to convince New York City’s government to guarantee any loans taken out to purchase taxi medallions. In theory, this would provide a backstop to falling medallion prices, which have been coming under pressure thanks to app-based transportation services such as Uber and Lyft. If the government would guarantee the loans for medallions, however, prospective buyers might feel less worried about shelling out large sums of money for an investment whose net worth could fall dramatically in the coming years.
To say that this creates “moral hazard” is an understatement. New York City would essentially be ensuring that no one would ever pay the price for making a bad decision to over-invest in taxi medallions. And unlike the case with AIG, which was a massive entity that provided insurance for, well, just about everything, it’s not clear that there would be a disastrous consequences for the economy if the taxi business failed.
The New York Times offers a smarter takedown of Friedman’s arguments than we ever could. Check it out by clicking here.