Cabby Capitalism

by Anne Kadet

Wall Street Journal
November 6, 2010

I remember the first time I heard a cabby brag about his genius medallion investment. In just five years, the value of his city-issued taxi operator's license had tripled, to $300,000. "Boy," I thought. "I really should look into that."

Yes, I really should have. Since 2001, the value of a corporate medallion (the kind you can own without personally driving a cab) quadrupled, to $825,000. Values have risen so steeply that the combined value of the city's 13,237 medallions now tops $10 billion. That's bigger than J.C. Penney, bigger than Whole Foods, bigger than ConAgra. If New York medallions traded on the NYSE, they'd qualify as a large-cap stock.

Not surprisingly, with all that money driving around, there's a whole cottage industry in place to support medallion investors. New York boasts 26 licensed medallion brokers and 69 medallion-leasing agents. We've even got a slew of lenders and a midsize bank dedicated to—you guessed it—medallion loans.

Medallion Financial (Nasdaq: TAXI) has a tagline: "In niches there are riches," and President Andrew Murstein says business is booming. Since his father, Alvin, a former fleet operator, founded the bank back in the 1950s, it's made $5 billion in medallion-backed loans, with zero losses. It's hard to repossess a house, but it's easy to repossess a medallion: You just hire a repo man to pluck it off the taxi's hood.

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