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Goldman Sachs Goes to Jail: To Make Money

This is not what OWS had in mind: Goldman Sachs is headed to Riker’s Island — to make a few bucks. New York City is about to try a cutting-edge approach to reducing recidivism rates among inmates at Riker’s Island prison. Goldman Sachs will invest $9.6 million in the initiative, which uses “social impact bonds,” also known as “pay-for-success bonds.” The New York Times has the details:

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.

The naysayers and the public-sector unions will scream and whine and warn about the risks. Defenders of the blue model will weep and wail and warn about the possibility that programs like this will fail. The Times dutifully lined up one such quote:

“I’m not saying that the market is evil,” said Mark Rosenman, a professor emeritus at Union Institute and University in Cincinnati, “but I am saying when we get into a situation where we are encouraging investment in order to generate private profit as a substitute for government responsibility, we’re making a big mistake.”

To be sure, the possibility of failure is real and it cannot be discounted. However, with current recidivism rates among Riker’s Island inmates at nearly 50 percent, what we are doing right now costs plenty of money and is failing miserably. A chance of success is better than the certainty of failure. Government needs to innovate and experiment and try a lot of things.

Sometimes you have to kiss a lot of frogs to find a prince. It’s time for America’s governments to pucker up.

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  • Anthony

    “New York City is about to try a cutting-edge approach to reducing recidivism rates among inmates at Riker’s Island prison.” Perhaps approach is new name or new component to the profitable prison-industrial complex. Is it so bad have our situation become that overreaching has now left the defined marketplace to enter penal institutions by way of recidivism – sociologist-criminologist ought to have palpitations behind this latest approach/innovation.

  • thibaud

    Arbitraging the state: best game in town.

    Nothing better shows the bankruptcy of US bankster capitalism than the fact that so many of the last two decade’s financial fortunes have been made by arbitraging the state or state-backed instruments of one form of or another – cf Soros and the British Treasury, the “carry” trade a few years back, Paulson and gov’t-pumped CMOs…

  • thibaud

    True that Goldman can lose money here, but why are we gambling with them anyway?

    Why can’t this country manage basic functions of government properly?

  • JCP Brown

    “…time for America’s governments to pucker up.” Oh what a chuckle that gave me – its one of the funniest lines I’ve read in a loooong while!

  • Eurydice

    @thibaud – This idea was part of President Obama’s 2012 budget – he was inspired by programs in the UK and Australia.

  • Billh

    Anthony, thibaud and other lost souls: In the U.S. today, there are certain societal issues government cannot or will not resolve, thus the private sector must step in no matter how repugnant that may be to some. Illegal immigration could be next.

  • Kevin

    Of course there are two ways to reduce recidivism. Hopefully this will not see Goldman teaching inmates better techniques to avoid getting caught (or convicted) the next time.

    Still it will be interesting to see what they can do. If the can cut recidivism anything like 10% it will be a bargain.

  • Anthony

    @6: Billh, no lost soul here and I am sure thibaud shares same sentiment (but we know he is quite able to speak for self). Private sector remains part of mixed economy my intent was not to infer otherwise (making observation on Goldman’s latest investment foray).

  • Mick The Reactionary


    “In the U.S. today, there are certain societal issues government cannot or will not resolve, thus the private sector must step in no matter how repugnant that may be to some. Illegal immigration could be next.”

    There are social issues that private sector cannot solve either, bastardy is one.
    Society institutions outside of government, churches and such, should try.

    Illegal immigration operationally is an easily solvable problem. Most countries in the world outside of suicidal western democracies have no problem handling illegals.

    A relatively small wall in Israel deters virtually all the most determined illegals, the ones with a bomb strapped to their chest.

    The problem is the US Ruling Class, in true bi-partisan fashion it wants cheap labor for Repubics and cheap votes for Demorats.

  • Alan

    Thanks to the failed war on drugs as well as the sheer number of local and federal criminal statutes the US locks up its own citizens at a shocking rate. More than any dictator or despot we lock up our own for insignificant petty drug crimes. We break up families, ruin lives and separate children from their parents. For what? The cost society incurs by incarcerating these people and then caring for the families and children left behind is so much greater than the costs of the original “crime”. But because the DEA, the prison-industrial complex and local law enforcement benefit from prohibition, the absurd prison sentences continue. Just like in the 1920’s all our modern prohibition does is enrich criminals and turn decent otherwise law-abiding citizens into outlaws.

    Every American should be ashamed that we hold 25% of the worlds prison population. There are a lot of good people, and a lot of productive human capital needlessly wasting away in prison.

  • Kris

    “Goldman Sachs Goes to Jail: To Make Money”

    Jesus descended into Hell: to save souls (“to open Heaven’s gates for the just who had gone before him”).

    But then, in this particular manifestation of its worship of Mammon, GS might actually be contributing to saving souls as well. Mysterious are the ways of the Lord.

    [Not even Kris knows how tongue-in-cheek this is supposed to be.]

  • thibaud

    Billh – before you trot out another tedious straw man, you really ought to read that wise post on these boards by Francis Fukuyama about “Conservatives and the State.”

    The notion that anyone to the left of our Tea Party nuts is somehow advocating a command economy just shows how stupid and extreme this faction has become.

    Fukuyama recalls for his readers the moronic Norquist line about “making government so small it can be drowned in the bathtub.”

    As Fukuyama’s editorial suggests, the most important battle now in the US is the fight for the soul of the GOP. The TPer influence needs to be curtailed the same way that sane GOPers in Buckley’s day reined in and eventually eliminated the influence of the Brother John Birch Society.

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