NCUA Sells Taxi Loans to Hedge Fund, Rejecting Pleas to Give NYC Officials More Time
The agency began the loan sales process in Sept. 2019, according to a "Frequently Asked Questions" document released by the NCUA Wednesday night.
Rejecting pleas for more time from New York City officials, members of Congress, taxi drivers and CUNA, the NCUA announced Thursday evening that it would sell a majority of the taxi medallion loans it holds to Marblegate Asset Management LLC.
“After thorough research and careful consideration, the NCUA determined this sale was the most appropriate action to meet its statutory obligation under the Federal Credit Union Act to achieve the least long-term cost to the National Credit Union Share Insurance Fund,” the agency said.
“The failure to achieve an orderly liquidation at the lowest long-term cost would violate the NCUA’s congressionally mandated mission of protecting the Share Insurance Fund,” the agency said, in announcing the sale.
The announcement came the evening before Thursday’s NCUA board meeting at which New York City taxi drivers are expected to appear.
The NCUA, as the liquidating agent for failed credit unions, has held thousands of loans to drivers and medallion owners.
A New York City Council Taxi Medallion Task Force recently asked the NCUA to give it time to form a public-private partnership that could purchase the loans and renegotiate the terms so that taxi drivers would not be required to pay more than $900 a month.
New York House members, CUNA and state leagues whose members made taxi medallion loans had urged the agency to delay the sale and give city officials time.
The agency rejected that plan and late Wednesday gave no indication of how Marblegate will treat drivers and medallion owners.
In announcing the sale, NCUA officials said that stopping the sales process would have created significant legal, reputational and counterparty risk for the agency.
“These risks would carry over to future asset sales and would likely result in the NCUA not being able to maximize recoveries for the Share Insurance Fund because future offerings from purchasers would be heavily discounted due to a perceived risk that a sale could fail,” the agency said.
Agency officials said Marblegate gave them enough evidence that they have a history of working with borrowers to provide relief when possible.
They said that private entities have more flexibility to work with borrowers than the NCUA does.
Marblegate already owns taxi medallions and specializes in purchasing distressed asset sales.