New York Mayor Michael Bloomberg announced on August 2 that Goldman Sachs invested $9.6 million in a promising experiment aimed at reducing recidivism and giving young reentrants the support they need to remain free. The loan was given to MDRC, an organization formerly known as Manpower Demonstration Research Corporation, which evaluates the effectiveness of social policies aimed at low income individuals. Bloomberg, through Bloomberg Philanthropy, has given MDRC a $7.2 million loan guarantee for the Goldman Sachs loan.
The funding will be used by the Adolescent Behavioral Learning Experience (ABLE) to keep young men recently released from Rikers Island from recidivating. At the end of four years, if ABLE has been successful in reducing the recidivism rate by ten percent, the New York City Department of Corrections (NYDOC) will pay back the $9.2 million to Goldman Sachs. The money from the NYDOC will come from the savings incurred from having to house less prisoners. If the recidivism rate drops further, Goldman Sachs stands to earn over $2 million in profit. If the recidivism rate falls below ten percent Goldman Sachs will lose $2.4 million. MDRC will also profit if the ABLE program is successful because they will be able to use the $7.2 million given to them by Bloomberg Philanthropy to fund other social impact bonds.
Connecticut, Massachusetts, New York State, the Federal Government are working on SIB projects of their own (see Social Impact Bonds: An Idea Whose Time Has Come in America, Reentry Central July 18, 2012).
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