New York City, embracing an experimental mechanism for
financing social services that has excited and worried government reformers
around the world, will allow Goldman Sachs to invest nearly $10 million in a
jail program, with the pledge that the financial services giant would profit if
the program succeeded in significantly reducing recidivism rates, the New York
Times has learned.
The city will be the first in the United States to test
“social impact bonds,” also called pay-for-success bonds, which are an effort
to find new ways to finance initiatives that might save governments money over
the long term.
First used in Britain and now being explored in Australia,
the bonds are rapidly capturing the imagination of some public officials in the
United States: on Wednesday, Massachusetts announced that it was completing
negotiations with two nonprofit groups to finance juvenile justice and
homelessness programs, with the promise of repayment only if the programs work....
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