More Bad News For Taxi Credit Unions
Bad news continues to trickle out about the taxi medallion industry.
Section 39 of New York’s Banking Law gives the DFS authority to regulate “unsafe and Unsound practices.” In the last couple of days there have been several reports about a supervisory order issued on July second by the NY DFS in consultation with the NCUA, which orders Melrose Credit union to swiftly take several steps to improve management oversight and develop a plan to reduce its exposure to medallion loans.
Most importantly, the credit union, which has specialized in making taxi medallion loans for several decades, was given 90 days to develop a plan, that must be approved by the regulators , to “prudently reduce and manage its taxi medallion loan concentrations in New York Philadelphia and Chicago to the extent feasible given market conditions, the existing loan portfolio and the credit union’s authority to restructure or refinance loans. “
In addition, the credit union is tasked with developing a classified action plan to reduce the credit unions portfolio of poorly performing assets. Specifically the credit union must either reduce charge off selloff or improve these classified assets.
With the order regulators also have taken firm control of the credit union’s management structure, including mandating that it hire a new CEO (which it has already done) and s senior lending officer. All senior hires are now subject to DFS approval.
While the order has understandably gotten a lot of attention, it also underscores just how far we still have to go before its even clear how the medallion issue will resolve itself. For instance, any plan to reduce medallion concentrations, no matter how well researched, will be little more than glorified guesswork until the medallion industry stabilizes. That won’t happen until we know just how big an impact Lyft and Uber are likely to have and we won’t know that until we know what the legal framework for the ridesharing industry is going to be.
In the immortal words of Mike Tyson “everyone has a plan till they get punched in the face” It’s likely that the last punch hasn’t been thrown.
Fed Minutes Released
I’m less interested in reading the minutes of the Fed Open Market Committee meetings then I used to be. To me, they show just how uncertain the guardians of stable economic growth are about the state of the economy.
It’s a lot like going for a checkup and being told by your doctor that he’s pretty sure you’re in great shape… but, then again, you just might be at Death’s Door depending on how healthy you really are…which is anybody’s guess. The doctor says he should know more in a couple of weeks, which is the same thing he told you two weeks ago.
For those of you who are interested in the minutes here they are.