The Globe and Mail reported on August 2 that Goldman Sachs will invest almost $10 million (U.S.) in a New York City jail program that will allow the investment firm to profit if it can reduce recidivism rates.
The move makes New York the first city in the nation to test “social impact bonds” that enlist private entities in an effort to save governments money over the long term.
The Daily Beast comments: “Utilizing a social-service bond – a new financial instrument – the most notorious investment bank will put $10 million into a program to cut the recidivism rate at New York City’s Rikers Island prison. The bond will be backed by a guarantee from Bloomberg Philanthropies, New York Mayor Michael Bloomberg’s philanthropic arm. For Goldman to get its money back on the deal, recidivism at the prison has to drop by at least 10 percent. If it falls lower than that, Goldman could make $2.1 million on its investment.”
On November 4, 2011, the activist Chris Hedges was one of at least fifteen demonstrators arrested when he participated in a demonstration outside the company’s headquarters. They had stated that “since the formal mechanisms of power refuse to restore the rule of law, then we, the 99 percent, will have to see that justice is done.”
Is it possible that Goldman Sachs invented a new financial instrument in response?