Goldman Sachs’ Outrageous Scheme to Profit Off Jailed Young Offenders

In 2012, Mayor Michael Bloomberg announced that New York City would be the site of a new experiment very dear to his billionaire’s heart. He declared that Wall Street megabank Goldman Sachs would provide a loan of nearly $10 million to pay for a program intended to reduce the rate at which adolescent men incarcerated at Rikers Island reoffend after their release (currently almost half reoffended within a year). The city government was short of money, so Goldman Sachs would step in to do what anemic public investment could not accomplish on its own: keep young men out of jail.
If the program succeeded, the giant bank would profit. The more recidivism dropped, the more taxpayers would have to pay Goldman Sachs. On the other hand, if recidivism didn’t drop significantly, Goldman would lose its investment.
In 2012, Mayor Michael Bloomberg announced that New York City would be the site of a new experiment very dear to his billionaire’s heart. He declared that Wall Street megabank Goldman Sachs would provide a loan of nearly $10 million to pay for a program intended to reduce the rate at which adolescent men incarcerated at Rikers Island reoffend after their release (currently almost half reoffended within a year). The city government was short of money, so Goldman Sachs would step in to do what anemic public investment could not accomplish on its own: keep young men out of jail.
If the program succeeded, the giant bank would profit. The more recidivism dropped, the more taxpayers would have to pay Goldman Sachs. On the other hand, if recidivism didn’t drop significantly, Goldman would lose its investment.

3. But social impact bonds deal with things we want to change. What’s the problem?
Mark Rosenman, professor emeritus at the Union Institute & University, has argued that while the programs themselves may be helpful in some cases, the problem is that companies like Goldman Sachs are profiting from them at the expense of taxpayers. He cites the example of Head Start, which 57,000 children have lost as a result of tax cuts and the sequester.
Meanwhile, Goldman Sachs has leapt into the breach, launching a social impact investment to provide private money as an alternative to public investments in early childhood education. As Rosenman explains, Head Start saves the government at least $7 for every dollar spent, but if Goldman Sachs has its way, we will be paying them and their clients part of that savings for having replaced taxpayer funding for such programs. “Let’s call it what it is,” writes Rosenman, “private profit crowding out a public good.”
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