In an attempt to resuscitate a positive image, Goldman Sachs have apparently invested about $9.6 million in jails, according to an article by DealBook. The money that GS has 'invested' goes to programs that are supposed to prevent kids from recommitting crimes. These programs counsel about 3400 adolescent males a year, which about 50% tend to re-offend. These bonds are called, "social impact bonds", and has already been introduced in Britain and tested in Australia:
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.
Clearly it's a PR campaign in light of all the scandals that's been surfacing across the industry. In my opinion, social impact bonds are ingenious. It would be difficult to accuse GS for wasting shareholder's capital if there's some profit to be made, and no one can accuse GS for exploiting this program if the profit is trivial relative to the billions of dollars they make every year. And who's to condemn others to make a profit by doing good. Businesses do it all the time by investing in clean tech. and other socially responsible and profitable businesses. In addition, if this program does turn out to be successful, it may also inspire other governments and private businesses to amend other societal issues for goodwill. It's a win-win situation. But that won't stop some from criticizing, as Mark Rosenman, a professor emeritus at Union Institute and University in Cincinnati has said:
...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.”
Perhaps there's some truth to that, but I'll leave that for you to judge. Regardless, these social impact bonds are quite creative and I hope they do work out.
What do you think? Do you like the idea? Do you think these social impact bonds will provide some goodwill, or will haters gonna hate? Do you think this arrangement will catch on?
There's no solution to the problem, government or private; some people are hardwired to offend. In general, fuckers gonna fuck.
I don't think this makes any difference to the GS name - its too intertwined with the financial crisis at this point. That being said, $10 MM is pocket change to them so it doesn't matter.
Guess this means I'll have to pick up some GEO on Monday
Mark Rosenman's statement literally defines what is wrong with America.
Fuck that guy.
All large corporations give money to charity. Not sure why these bonds would be any better for PR than a straight-up check.
I also question the public policy aspect of these bonds.
Think of it this way--private institutions will only put up money for causes they think can be successful. So let's say they put up $10 mm, which is the cost to run the program. If it's successful, the government pays them back their $10 mm plus, say, $2 mm. So the cost of the program is now 20% higher--the government could have simply solicited competitive bids from private companies for $10 mm. Keeping their contract indefinitely would be the motivation for performance.
Now, if a company won't pursue a program it's because the company thinks there is little chance for success. In this case, the program shouldn't be funded at all by anyone, public or private.
The most obvious thing that will occur, however, is mass crony capitalism and corruption, which is inevitable when you're talking multi-million contracts and profits from government. All-in-all, the public policy outlook looks terrible with regard to SIBs.
It's a win-win for Goldman. If it works good PR + money back + profit. If it doesn't work they make headlines giving $9.6 million and only lose $2.4 million.
10% reduction is 3400*0.1 = 340. 9.6m/340 = 28k per guy. MDRC should be dissolved if they can't fix a guy for that sum, and a far better policy would be to spend less on prisons. It is ridiculuos that a prisoner costs over 40k a year and the prisons cost every taxpayer 450 USD a year.
In contrast, Russian prison system is roughly 3125 usd per prisoner (real cost is less when you deduct corruption). Why treat prisoners so kindly in the US?
> 39:26 - bit about environment in more strict Russian prisonsSurprised nobody has brought this up yet: Goldman can suck my balls.
Bravo!
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