New York City just awarded a contract for the country’s first-ever “social impact” bond – giving Goldman Sachs a chance to improve society and maybe even make some money at the same time.Mayor Michael Bloomberg revealed Thursday that Goldman would provide $9.6 million for a program that counsels young adults in New York City’s main jail complex on Rikers Island.
That program is aimed at reducing the rates at which these inmates are re-incarcerated.
In order for Goldman to make back the money it invested, the rates at which people return to jail must be reduced by 10 per cent. Goldman could actually make money on its investment if recidivism rates are reduced more than that.
Goldman CEO Lloyd Blankfein described the program as an innovative way to use private financing for important public initiatives.
“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,” he said in a statement.
However, some members of the philanthropy and nonprofit field have questioned the wisdom of tying private monetary incentives to public projects, The New York Times reported Thursday.
“I’m not saying that the market is evil,” Mark Rosenman, a professor emeritus at Union Institute and University in Cincinnati told the Times, “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.”
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