Wednesday, July 8, 2015

Wealthy Crime Pays, Even When It Doesn't

Goldman Sachs, the banking behemoth aptly described by Matt Taibbi as a giant vampire squid, has made big suckers out of the clients it grotesquely advised to bet on how long youths caught up in New York City's criminal justice system could stay out of jail after their initial releases.

A mere seven million dollars out of the trillions of Goldman's money was spent on privatized counseling services to young Rikers inmates in an effort to help them become responsible members of society. No Goldman money was spent on a jobs program to help them become responsible members of society once they were released. No Goldman money was spent on housing for young offenders or their families, many of whom who lost their homes and jobs when Goldman helped wreck the economy during its previous betting spree on subprime mortgages and collateralized debt obligations.

Nobody at Goldman has ever paid his debt to society by going to prison. Even rare criminal convictions have a way of eventually getting overturned.

And now Goldman's social impact scheme, placing odds on youthful recidivism rates, has been blessedly shut down one year early by the city. Not because cynically betting on the desperation of indigent people is morally wrong, mind you -- but because a couple of rich investors are said to have lost money on the deal. The black and Latino kids kept getting arrested and sent back to Rikers despite the Goldman-subsidized jail counseling sessions.

Knock me over with a feather.

As is typical for Goldman, though, it will recoup most of its own losses based upon a loan guarantee from Michael Bloomberg, Forbes godzillionaire and mayor of New York at the time the scheme was hatched.

Also as is typical for Goldman and other too big to fail/jails, the early shutdown of their gruesome scam is actually being touted as a resounding success story. That is because the rich were not taxed to pay for it! The paper losses by a banking casino using Rikers inmates as chips will in no way discourage the billionaire class from continuing to bet on the misfortunes of the poor. Social impact bonds will be part of the dystopian landscape as long as neoliberalism lives. The hyper-rich will always find new ways of extracting blood from the masses.

Because when you are obscenely rich, nothing succeeds like the failure of others. Or, as the Dowager Duchess of Downton Abbey was wont to say,"Nothing exceeds like excess."

The house never loses.

Social impact bonds are beginning to actually replace the government safety net as a means of "helping" the poor. From the Chronicle of Philanthropy:
Pay-for-success efforts, also known as social-impact bonds, involve private or philanthropic investors funding new approaches to social issues, with an opportunity to earn returns if programs meet preset targets and governments take them over. Goldman Sachs ended up spending $7.2 million on the Rikers effort but will recoup $6 million from a loan guarantee offered by Bloomberg Philanthropies.
The model "can unlock new pieces of funding, private capital especially," said Jim Anderson, who leads the Bloomberg foundation's government-innovation program. "Even though we didn't get the result with the [recidivism] program that we all wanted and hoped for, we now know that definitively, thanks to the social-impact bond structure that we put in place."
Not once did the philanthrocapitalists question why black youths failed to stay out of prison. Not once did they ponder whether crushing poverty, police brutality, the racist war on drugs, stop and frisk policies and other forms of racial profiling contribute to the prison recidivism rate. Never once did they condemn the culture of cruelty at Rikers itself. All they care about is making money and "unlocking the potential" of capital as more and more people are locked up in the increasingly privatized American prison system.

As I have written about before, President Obama's own "Brothers Keeper" scheme is also modeled upon the social impact bond structure. When he first announced his initiative, he pointed to Bloomberg/Goldman's Rikers Island program as one of his inspirations.  Under Obama's version, corporations will be given government money (tax breaks) in order to study social problems and "invest" in black youths, while the black youths themselves will not receive any direct cash aid at all. It was under the 90s Neoliberal Bill and Hillary Clinton regime, after all, that direct cash aid for the poor was triangulated right out of existence. And then came their own personal version of Social Impact on Steroids, aka the Clinton Foundation. There is so much money in poverty. It's a most ingenious paradox.

A few experts, though, have questioned the ethics of using social impact bonds as a means of profiting from social ills while purporting to cure them. From an August 2012 New York Times article on the Rikers scheme: 
“I’m not saying that the market is evil,” said Mark Rosenman, a professor emeritus at Union Institute and University in Cincinnati, “but I am saying when we get into 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.”
Rosenman is too kind. The market is indeed evil when it's unregulated. It's not that mistakes are being made, it's that crimes are being committed... by the wealthy investor class and the political system that enables it.


Meredith NYC said...

Yikes I’d never heard of this --- “Goldman's money was spent on privatized counseling services to young Rikers inmates in an effort to help them become responsible members of society."
Then if it fails, blame the Rikers inmates. But, where are the jobs? Where is trickle down?

Is there some privatized counseling service to turn Goldman and other corporate sociopaths into responsible members of society? So they would stop taking from the country, and realize a duty to it?

Matt Taibbi was on Democracy Now tonight saying that our regulatory agencies are increasingly being staffed by corporate lawyers who keep their bankster clients from jail. He discussed AG Holder particularly, now going back to his law firm, who said breaking up and prosecuting big banks would hurt the economy.

Meredith NYC said...

Off topic, but can't help posting, re Sanders NYT coverage, criticized by 2 letters to editor---1 from his college roommate. see below.
I sent this to NYT.

Re NYT article: “Bernie Sanders’s Revolutionary Roots Were Nurtured in ’60s Vermont”.
Also titled: “Outsider Went Mainstream, but Message Changed Little.”

Another article negative on Sanders. Page 1, this time with photo of dark wild hair in his youth.

Congratulations NYT. It’s of historic journalistic significance to dig up a 50 year old college article where the candidate once only mentioned studies from Psychosomatic Medicine Journal linking cancer and too few orgasms (not organisms, but orgasms.) among other things. Great investigative reporting to dig that up, Ms. Lyall.

Your article plants an image of Sanders as an isolated, radical hippie, with obsessive anti establishment views. Just what we need in 2015, hoping for some positive change at last!

Comments show many wondering---does the condescending tone come from explicit instruction of higher ups? Or is that not necessary? Or just happenstance?

Where’s serious discussion of Sanders’ positions pro/con vs the other candidates? Only tilt coverage to biggest fund raisers?

It’s telling that Paul Krugman hasn’t yet breathed the word Sanders in print, yet their views would seem aligned. What are the reporters and columnists afraid of?

How about some background on what Sanders did as a mature senator, after his hair turned white and thin.

Sanders held senate hearings last year on health care in other countries, with testimony from Canada, Denmark, France and Taiwan. NO Times coverage at all. I came across it on cpsan. That hearing would have offered actual operating models to debate here, if covered by media.

Below --- 2 letters to NYT editor, today, 1 from sanders’ college roommate, and 1 from the standpoint of the 60s---to counter Lyall’s article:

Bernie Sanders in the 1960s: Serious, Not Wild
JULY 8, 2015
To the Editor:

I roomed with Bernie Sanders, the presidential candidate, at the University of Chicago in 1963, and he was not the wild man you describe (“Outsider Went Mainstream, but Message Changed Little,” front page, July 4).

At that time, 21 years old and about to enter his senior year at Chicago, Bernie Sanders was more serious than most undergraduates, even undergraduates at Chicago, who were and are more serious than most others.

He was serious about political reform, supported the Rev. Dr. Martin Luther King Jr. and called himself a democratic socialist. He was reading Erich Fromm’s “Escape From Freedom,” a psychoanalyst’s evaluation of why insecure and frightened people embrace totalitarianism.

He had a steady girlfriend, and they went to the beach on weekends in his jalopy. He did not touch drugs or alcohol. He had a Brooklyn accent. He was unusually earnest, moralistic, intelligent and keen in argumentation, but not self-promoting. He had friends.

Inverness, Calif.
The writer is professor emeritus of sociology at U.C.L.A.

To the Editor:

The 1960s in America were a time when those of us with a brain and a conscience desperately sought to make things right.

Our promising president was assassinated in front of our eyes, cities erupted in race riots and people who tried to assert that all men are created equal were being murdered.

Churches with children inside were being bombed, and in Vietnam, monks were setting themselves on fire.

The Rev. Dr. Martin Luther King Jr. and Robert F. Kennedy were assassinated; our soldiers dropped napalm and spread defoliant all over a small country and massacred the villagers in My Lai.

The progress of the war in Vietnam was reported to us nightly in terms of a “body count,” and we were told that “it became necessary to destroy the town to save it.”

Most of us watched in a paralyzed horror. It seems that Bernie Sanders tried to do something, as he is trying to do now. He is a United States senator, and he deserves more than your bemused contempt.
Norwalk, Calif.