I don’t know all the technicalities, but here’s the basic premise:
In most metropolitan areas, taxis are regulated; and municipal authorities only allow (via a “medallion” system) a certain number of taxis to operate. Only an operator with a medallion (an actual metal piece affixed to the hood of the cab, at least in NYC) is allowed to operate as an official taxi. Since there are a limited number, they are often auctioned off, going for hundreds of thousands of dollars each in places like New York City and Chicago. Many operators will finance their purchase of a medallion with a loan because they either do not have the cash to lay out up front or choose to use financial leverage to purchase.
These medallion loans are offered primarily by commercial banks, with the (valuable) medallion itself as collateral. There are often special regulations on medallion loans. They are/were extremely stable as long as cities kept quantities limited and people needed a ride. But if an innovative competitor ever arrived on the scene who could seriously cut into demand for taxi rides, operators might start having trouble making their loan payments, the medallions themselves could fall in value, and the commercial banks making the loans might have to allocate more funds for losses in their medallion loans.
They call me,
Mr TBS