McWatters, Filson Square Off in Battle Over Taxi Sales Fairness

New York government and private industry officials had no immediate plan to obtain the funds needed to purchase the NCUA’s taxi medallion loans and the agency could not give them additional time to do it, NCUA board member J. Mark McWatters said Monday.

But a former NCUA senior official said the sale of taxi loans to a Connecticut hedge fund shreds the goals of the credit union movement and that there was no rush to sell the loans.

“(The) NCUA’s sale of 4,500 credit union members’ loans secured by taxi medallions to a private equity firm is a betrayal of everything the credit union cooperative system represents,” Chip Filson, former chairman of the board and co-founder of Callahan & Associates, wrote in an analysis posted to his blog. “Credit unions were founded to protect consumers from being exploited by loan sharks preying on those who have the least or know the least about financial services.”

Filson is the NCUA’s former president of the Central Liquidity Facility and Director of the Office of Programs.

Speaking at CUNA’s Governmental Affairs Conference, McWatters said the agency was far along in the sales process when New York officials first broached the option of forming a public-private partnership to purchase the loans from the agency.

“At best, the parties had a plan to develop a plan to raise an unspecified amount of funds to purchase the medallion portfolio at an unspecified price pursuant to an unspecified timetable,” he said, referring to the New York officials.

The NCUA board last week approved a plan to sell its taxi medallion loans to Marblegate Asset Management.

The agency held the loans because two major credit unions that had made loans to taxi drivers with the medallions as collateral – Melrose Credit Union and LOMTO Federal Credit Unions – failed.

The failure of those credit unions resulted in the Share Insurance Fund losing more than $750 million.

New York officials and representatives of the city’s taxi drivers and medallion owners asked the NCUA to hold off the sale of the medallions so they could form a public-private partnership to purchase them.

Agency officials met with city officials and the drivers.

“Regrettably, the senior staff determined that no party had committed funds or had demonstrated a reasonable prospect of raising sufficient funds in the near-to- intermediate term, if ever, to purchase the agency’s taxi medallion loan portfolio,” McWatters said.

McWatters said the agency made it clear to anyone interested in purchasing the loans that they had to deal with medallion owners in a fair manner.

“We specifically excluded vulture funds from the process and eliminated any prospective purchasers who did not demonstrate: The capacity to adequately service the loans, a track record of treating borrowers in a fair-mined manner and a financially workable bid,” he said.

But Filson said he does not believe that Marblegate will look out for the best interests of drivers.

“(The) NCUA has turned these credit union members’ financial fate over to a fund whose sole goal is to maximize return on invested funds,” he said.

McWatters said after 18 months of negotiations, the agency “identified a winning bidder who offered the least-cost option to the Share Insurance Fund and satisfied our good-faith and fair dealing requirements.”

McWatters said if the sale had been postponed, the agency would have lost the best bidder.

He added New York city officials still could raise funds to help drivers pay off their loans.

But Filson criticized the agency for providing no details about the sale other than the purchaser of the loans.

“This fact vacuum suggests (the) NCUA either does not have data to support the sale process or is afraid the data would not justify their action,” he wrote.