Jordan Wathen must be a masochist. He repeatedly embarrasses himself when it comes to ranting about the taxi medallion financial industry. I have to waste my time demonstrating this kid’s ignorance, and now I have to do it again.

In a couple of tweets on Tuesday, he reiterates an incredibly ignorant assertion.

“Broken logic I don’t understand: Companies X and Y have loans with similar yields and amortization periods. Yet, somehow, investors believe X has better underwriting and collateral (LTVs) than Y. Nonsense.”

Broken logic, indeed. Let me educate you AGAIN, Jordan.

Just because two companies have similar yields and amortization, why does that somehow mean they have similar underwriting?

I guess Jordan Wathen was still in diapers during the financial crisis, when lenders like US Bank underwrote mortgages very conservatively whereas Bank of America did not. Despite having similar yields and amortization in their real estate portfolios, US Bank suffered far, far less damage than B of A and most other banks.

There’s even more history to the taxi medallion financial industry that Jordan Wathen doesn’t understand.

What Jordan Wathen doesn’t know about the taxi medallion financial industry is that prior to the financial crisis, there weren’t a lot of players. There were, of course, some very experienced ones.

Federal regulators encouraged numerous lenders to diversify their portfolios after the financial crisis. They wanted lenders to move money away from real estate, so the lenders obliged. Although lenders didn’t have experience in the taxi medallion financial industry, they saw taxi medallion prices soaring, saw an asset with great cash flows, and wrote a lot of loans.

Except they wrote these loans without having the requisite experience. So they wrote to higher LTVs without enough collateral behind the loans, and are now paying the price.

Other lenders wrote extremely conservatively, only making loans to those it felt confident would be able to pay on them, and who had additional collateral beyond the taxi medallion itself.

So, yes, Jordan there is a difference. You would also know this if you bothered to call Company X. Which you haven’t. The obvious question is “why”? How about this: you’re lazy, sloppy, and not a real journalist.

But wait! Jordan Wathen embarrasses himself still further.

“Think like the borrower. Why would you borrow from X if Y offers substantially similar loans with less collateral, covenants, whatever… Borrowers shop this stuff around.

Exactly! Why WOULD you borrow from X if it has tighter underwriting? First of all, you may not even have a choice. Because X has tighter underwriting, they may not even OFFER you a loan. You go to the easier lender.

Jordan Wathen’s logic is profoundly flawed. His premise is that if Y offers a loan with the same terms as X, but with easier underwriting, therefore X would have the same lax underwriting because they would want to compete for the same business.


They would not. This insipid logic suggests that all lenders in a given sectors would have exactly the same underwriting. Really?

Then why did US Bank survive the mortgage crisis better than other banks?

Why do twenty different lenders show up on a search for any kind of loan at, each with different rates, different applications, and different ways of determining loan terms?

Why are there loan brokers who know how different lenders operate, so as to steer you to the best lender for your needs?

Why are there such things as “subprime lenders”? Because they have looser underwriting standards?

Why does Investopedia and the Motley Fool give Jordan Wathen a venue for his stupidity?

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