Goldman Sachs is banking on a program to reduce recidivism among New York's incarcerated.
(The Root) -- One could argue that the barons of Wall Street don't usually wake up in the morning wondering whether the decisions they make before sundown will advance or hinder America's prison population. However, an experimental effort involving investment firm Goldman Sachs that will launch later this year may change all that.
Earlier this month, New York City Mayor Michael Bloomberg announced that the company will loan the city $9.6 million to finance a program designed to reduce recidivism -- the rate at which newly freed inmates return to jail -- among young men imprisoned at Rikers Island.
As part of Bloomberg's nascent Young Men's Initiative, the four-year program known as the Adolescent Behavioral Learning Experience will provide education and counseling that encourage responsible behavior for an estimated 3,400 Rikers inmates per year. The aim of the specialized training is to reduce the likelihood that they will return to prison, which New York officials say happens to 50 percent of young men within 12 months of their release from Rikers.
If the program reduces recidivism by 10 percent, Goldman will get its money back, according to reports. If there's a drop of more than 10 percent, the firm could earn as much as $2.1 million. But if the rate of reincarceration falls by less than 10 percent, it could lose up to $2.4 million.
Depending on the success of the ABLE model, New York and other cities may be encouraged to utilize more "social impact bonds" -- the investment vehicle through which Goldman is financing the program. Other areas that could benefit include novel educational efforts for inner-city children, programs that succeed in reducing teen pregnancy or solutions to the obesity epidemic.
It's quite intriguing to witness Goldman Sachs, a shining emblem of all that's good and all that's bad about Wall Street, getting involved with the criminal-justice system in a way that could be helpful to young incarcerated men.
The perceived inequity of that system -- and especially the impact that the war on drugs has had on conviction rates for African-American men -- is typically at the top of the list of critical issues facing black America. An entire generation of inner-city black youths has come to see prison as a rite of passage. And it's an especially pernicious rite, leading directly to second-class citizenship, with former prisoners unable to vote, get a decent job, live in public housing or take advantage of other basic rights that most citizens take for granted.
For the financial-services industry, though, the prison-industrial complex is often considered a boon. The industry makes money helping states and cities float bonds that pay for prison construction and operating costs -- guards' salaries, food and the other expenses that make the per-prisoner cost of incarceration higher than the per-student cost of education.
Wall Street exists in part to make money. Its success in doing so is the source of its almost unlimited political influence. But if segments of black America and other disenfranchised communities can benefit from aspects of the corporate world's self-interest, it could result in a firmer economic foothold for minorities in the American mainstream.
Of course, caveats are in order: The amount of the loan -- almost $10 million -- is not a lot of money for Goldman Sachs. The company earned more than $900 million just in the last quarter. Burnishing its beleaguered image is surely as big an incentive for the company as is the chance to earn a couple more million dollars. As the Libor scandal shows, the financial-services industry is not above outright cheating to obtain the results it wants.
Today, New York City's new project is just an experiment. There is no guarantee that it will have a positive impact on the number of repeat incarcerations. But in an era when federal, state and local governments have run out of money to finance even the most effective social programs, perhaps we should be rooting for it to succeed.
Harold J. Logan is a business writer with a background as an Internet entrepreneur.