Goldman Sachs Partners With NYC Prisons; Hopes to Profit in the Process

Thursday, August 2

espite billions and billions of taxpayer dollars, studies have found that more than 40 percent of ex-convicts commit crimes within three years of their release and end up back in jail.

Prison systems are supposedly there to rehabilitate the men and women who go in, but more and more evidence is proving that incarceration does anything but that. That’s why today’s announcement of a partnership between New York City and Goldman Sachs is such big news.

New York Mayor Michael Bloomberg announced today that the city will be forming a new partnership with Goldman that will reward the company financially if its program to reduce prison recidivism rates works.

Even with an increase of funding to $52 billion in 2011 from $30 billion spent on prisons a decade ago, a study by the Pew Center on the States found there was only marginal improvement in the nation's recidivism rate. That’s helped to create a grim reality where one in every 100 Americans is now locked behind bars.


New York has decided to try a new approach. According to the New York Times, Bloomberg is signing off on a program where Goldman will provide a $9.6 million loan to pay for a new four-year program designed to reduce the rate at which adolescent men who are incarcerated at Rikers Island reoffend after their release.

According to the Times:

“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 program was actually created in England, in a small town called Peterborough, in 2010. Results from the program will not be available for two years, but Bloomberg seems to be willing to step out on faith and so does Goldman. The company made almost $29 billion last year and has $923 billion in total assets, so $9.6 million is essentially pocket change.

Still, if the program is successful it would provide a 22 percent return on investment. That kind of money could lead to further investment from other large corporations seeking to make a return on a goodwill investment that could also net them lots of positive press.

Programs like this one have been in existence for some time, but they were all nonprofit funded or funded by the state. With Goldman’s money on the line there’s a great deal more invested in seeing positive results. Massachusetts is also planning to go ahead with a similar program.

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