Francescani reports: "Goldman will create one of the nation's first 'social service bonds' to help fund a New York City program that aims to lower the 50 percent recidivism rate among youthful offenders."

Rikers Island correctional facility, New York. (photo: unknown)

Goldman Sachs Invests in NYC Jails

By Chris Francescani, Reuters

06 August 12

Goldman Sachs will invest nearly $10 million in a New York City jails program, using an innovative financial instrument in which private investments fund public social services, Mayor Michael Bloomberg said on Thursday.

oldman will create one of the nation's first "social service bonds" to help fund a New York City program that aims to lower the 50 percent recidivism rate among youthful offenders jailed at the Rikers Island correctional facility.

Unlike similar proposals being developed elsewhere, most of Goldman's 'Rikers bond' will be guaranteed by Bloomberg Philanthropies, the mayor's philanthropic group, which will back $7.2 million of the $9.6 million investment the bank plans.

Bloomberg called juvenile offender recidivism in New York City an "entrenched" problem.

"Helping young people who land in jail stay out of trouble when they return home is one of the most difficult and important challenges we face," he said in a statement.

The four-year program, in which private non-profit groups will provide education and intensive training and counseling to at-risk incarcerated youths, must reduce the recidivism rate by at least 10 percent for Goldman to recoup the investment.

If the recidivism rate drops further, Goldman could profit up to $2.1 million beyond its original investment, according to Samantha Levine, a spokeswoman for the city. If the program fails to reduce recidivism by 10 percent, Goldman could lose $2.4 million.

Social impact bonds partner local governments with non-profits and private investors in deals that require a government to pay out only if a social services group can meet a specified performance goal.

It is unclear how popular philanthropic bonds will be, given that profits depend on societal improvements [ID:nL2E8J1IT2]. But the notion of social impact bonds is politically attractive: cash-strapped municipalities risk little on innovative social programs and investors benefit from being seen as socially conscientious.

Goldman Chairman Lloyd Blankfein said his firm hopes to drive more private investors toward similar public-private philanthropic partnerships.

"We believe this investment paves the way for a new type of instrument that enables the public sector to leverage upfront funding from the private sector," Blankfein said in a statement issued on Thursday.

The notion of social impact bonds was first tested two years ago in Peterborough, England. In 2010, the British government agreed to pay 5 million pounds, about $8 million, to a non-profit organization to reduce the recidivism rate at Peterborough's city prison.

Earlier this week, Massachusetts awarded contracts to two non-profit groups to create programs to address homelessness and juvenile crime.

(Additional reporting by Manuala Badawy; Editing by Paul Thomasch and Dan Grebler)

Comments

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+3 # fliteshare 2012-08-06 20:08

Smart move, just in case their stay might turn out to be somewhat longer. I merely see it as ensuring the facilities are up to par. After all they are professional hedgers and understand such risk exposure like no one else.

0 # portiz 2012-08-08 19:02

It costs $30,000/year to keep an inmate in prison.

It costs $4,000 to provide an education/degre e to an inmate.

Inmates who complete a degree in prison have a recidivism rate that is 10% of those of the non-degree-finishers.

It's a no-brainer.

+4 # grandma lynn 2012-08-06 23:30

I find myself trying to figure what Goldman can do to force the 10% success rate and get to the profit. How can this be scammed? Do the repeat offenders have to steer clear of NYC /in-state New York offenses in order to be uncounted as recidivists? Is it only return to Rikers or return to NYC criminal charges that count? Tracking will be done how, if not? Can tracking lapses benefit Goldman? What is the fix?

-5 # barbaratodish 2012-08-07 01:34

Being locked up anywhere in NYC is almost a privilege, considering the exorbitantly high cost of a square inch of property in NYC! lmfao

+7 # dkonstruction 2012-08-07 06:28

ironic at best that a company seems to have perfected multi-million (if not billion) dollar financial criminal recidivism is now being hired to prevent "street crime" recidivism amongst "at risk" youth. One more step in the ongoing privatization of everything in the world including basic services (prisons, schools, etc.,) and even basic natural resources (water...how long will it be before they pull a "Total Recall" on us and privatize the air). Are they going to providing these "at risk" youth gainful employment when they are released (will Golman commit to hiring them and paying them a "living wage")? Are they going to allow them to return home to their families if the families live in public housing (which, since Clinton's draconian crack laws, they are permanently barred from even visiting)? A truly disgusting (though hardly surprising) move on the part of Goldman and Bloomberg. Who said crime doesn't pay?

+5 # reiverpacific 2012-08-07 08:10

Goldman and their blood-sucking ilk ("Doing God's Work") are probably one of the main causes of the incarceration of so many young people by exercising their greed option and removing opportunity from all but the few.
They could give a damn about anybody except themselves and should be the inmates art hard labor.

+1 # CL38 2012-08-07 11:32

Goldman Sachs should be facing jail time and enormous fines for what they've done.

0 # Willman 2012-08-08 18:12

two ish million is chump change for goldman.It might be a good program with results. Time will tell.
Looks like "green washing" to me though.

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