Emily Talmage writes here about the introduction of “social impact bonds,” an ingenious way devised by Wall Street to make money on kids.
In 2006, in a presentation to ReadyNation marked “Strictly Private and Confidential,” Paul Sheldon of Citigroup proposed a new way to finance preschool: early childhood student loans.
Non-profit organizations could borrow from banks or student loan companies, said Sheldon, and then offer loans to government organizations or individuals. Then, the loans could be pooled and turned into asset-backed securities, and – voila! – an early childhood education market would be created, worth as much as 10 billion dollars.
The idea of preschoolers saddled with debt, however, was clearly going to be too controversial.
Over time, Citigroup’s model was reworked into the more palatable “social impact bond,” which are now proliferating across the country.
These bonds, which are really private loans made to government or non-profit agencies with repayment contingent upon pre-determined “outcomes,” are sold under the premise that they can help tax-payers save money in the long-run by preventing the need for remedial services.
A clever and rather unscrupulous way to monetize early childhood education without providing any services.
Diane Ravitch's blog 
That’s the least of the problem. Corporations make money on kids that are sick. They make money on children who are not sick. Why is this a surprise?
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Some services are provided, but only those judged to be profitable and easily measured, such as passing the Peabody Picture Test, or “read by grade three.”
One result: Preschoolers with disabilities who are unlikely to meet the preferred on-time outcomes are screened out of the program.
Obama gave $200 million to help jump start these financial products. The Harvard SIB lab was an early incubator for these products. The early projects were backed up with money from major foundations and Wall Street investment houses.
Robinhood.org has a website that shows some of the “metrics” that can be used to calculate the value of a preschool program in NYC. The basis for each calculation is given in detail. The overall result is an estimate of $50,650 per child…in 2014. See pages 3 to 6 for the specifics. There are additional calculations of the dollar value of expected social costs avoided, if “proper” interventions are made and produce the best outcomes.
You can bet your whatever that these programs do NOT invest $50,650 per child in preschool. The calculation is designed to market the program to government officials who have a short term goal of cutting budgets for social services, including pre-school. The marketers, including government officials tell citizens that the “deal” will save taxpayers $50,650 per child in the long run. In fact, if the program suceeds in producing the carefully selected targets, taxpayers pay the investors back with an estimated 7% profit part of the payback.
This kind of financial product is being marketed internationally. One effect is that governmental responsibilities for the public welfare and the common good, especially social services, are transformed into opportunities for government-endorsed private control and profiteering. Notice that Robinhood even has a metric for “quality of life.” It is appropriated from finance in medicine.
Click to access Metrics-Equations-for-Website_Sept-2014.pdf
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In my mind the scariest words here are the words “screened out.” The game we are now watching as those with money — or those looking to make money — seek to find and fund the “right” kids is deeply frightening.
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“Quality of life” by Robinhood reeks of the Koch taint, e.g. college campus “Well-Being Centers”.
There’s no low too low-taking tax money intended for kids.
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The PR words, coined by exploiters, “make money” should be changed to reflect the truth, they “take money”. The firms described in the post add nothing of value, thereby “making” nothing. Racism, theft, “charter” instead of contractor schools and other forms of exploitation shouldn’t be allowed to hide behind pretty words.
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I don’t understand where the money is supposed to come from to pay back these bonds plus some. With a promised return for “success,” taxpayers are going to be on the hook for money no one has figured out how to pay.
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