Goldman to Invest in City Jail Program, Profiting if Recidivism Falls Sharply
By David W. Chen - The New York Times
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In New York City, Mayor Michael R. Bloomberg plans to announce on Thursday that Goldman Sachs will provide a $9.6 million loan to pay for a new four-year program intended to reduce the rate at which adolescent men incarcerated at Rikers Island reoffend after their release.The money is not a huge amount for Goldman, which last month reported over $900 million in second-quarter profit, and the investment promises a public-relations benefit for the Wall Street bank. For the city, the money allows the Bloomberg administration to demonstrate, and test, several of its priorities: enlisting private sector help in financing public needs, and tying program money to rigorous outcome evaluations.The Goldman money will be used to pay MDRC, a social services provider, to design and oversee the program. If the program reduces recidivism by 10 percent, Goldman would be repaid the full $9.6 million; if recidivism drops more, Goldman could make as much as $2.1 million in profit; if recidivism does not drop by at least 10 percent, Goldman would lose as much as $2.4 million.“This promising financing model has potential to transform the way governments around the country fund social programs, and as first in the nation to launch it, we are anxious to see how this bold road map for innovation works,” Mr. Bloomberg said in a statement.“Social impact bonds have potential upside for investors,” he added, “but citizens and taxpayers stand to be the biggest beneficiaries.”In a twist that differentiates New York’s plan from other governments’ experiments with social impact bonds, Mr. Bloomberg’s personal foundation, Bloomberg Philanthropies, will provide a $7.2 million loan guarantee to MDRC.
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