God’s Work – How Goldman Sachs Scammed a Utah Program Meant to Help Preschool Children

Doing Gods Work

God’s Work – How Goldman Sachs Scammed a Utah Program Meant to Help Preschool Children:

Goldman Sachs announced last month that its investment in a Utah preschool program had helped 109 “at-risk” kindergartners avoid special education. The investment also resulted in a $260,000 payout for the Wall Street firm, the first of many payments that is expected from the investment.

Yet since the Utah results were disclosed, questions have emerged about whether the program achieved the success that was claimed. Nine early-education experts who reviewed the program for The New York Times quickly identified a number of irregularities in how the program’s success was measured, which seem to have led Goldman and the state to significantly overstate the effect that the investment had achieved in helping young children avoid special education.

Goldman said its investment had helped almost 99 percent of the Utah children it was tracking avoid special education in kindergarten. The bank received a payment for each of those children.

The big problem, researchers say, is that even well-funded preschool programs — and the Utah program was not well funded — have been found to reduce the number of students needing special education by, at most, 50 percent. Most programs yield a reduction of closer to 10 or 20 percent.

– From the New York Times article: Success Metrics Questioned in School Program Funded by Goldman

Just when you think “Too Big to Fail and Jail” Wall Street can’t stoop any lower, they go ahead and exceed expectations. The following story is so base, so disgusting, and so completely void of any semblance of ethics, it could only have been achieved by the Vampire Squid itself.

The scheme revolves around a crony practice that is increasingly being embraced within our Banana Republic economy: Public-Private Partnerships. I’ve warned about these previously, for example, in the post, Meet Cyber P3 – The U.S. Military’s Public-Private Partnership to Create Corporate/Government “Cyber Soldiers,” I wrote:

If there’s one thing I’ve learned over the years, it’s that whenever you hear the term “public-private” partnership, brace yourself for a screw job of epic proportions.

It makes perfect sense if you think about it. If you’re a large corporation, there’s nothing better than guaranteed profits; and there’s no better way to guarantee profits than by going into business with the one entity that can do this: government. On the other hand, if you are an ambitious and greedy politician, what better way to earn a fortune while ostensibly engaging in “public service” than by lining the pockets of big corporations, which will then line your pockets in return in various opaque ways. Extraordinary fees for speeches is one preferred way of doing this, as is the classic revolving door that gives the person a cushy corporate job after leaving government.

Or put more simply, these “partnerships” are merely schemes by which clever corporate executives figure out how best to loot taxpayers without anyone noticing. Enter Goldman Sachs.

From the New York Times:

Goldman Sachs announced last month that its investment in a Utah preschool program had helped 109 “at-risk” kindergartners avoid special education. The investment also resulted in a $260,000 payout for the Wall Street firm, the first of many payments that is expected from the investment.

Gov. Gary R. Herbert of Utah hailed the program as a model for a new way of financing public projects. Such so-called social impact bonds are a new kind of public-private partnership, promising financing from Wall Street and imposing a goal on local governments.

“Social impact bonds.” You’ve gotta be kidding me. The only impact here was to Goldman’s bottom line.

Meanwhile, there’s that “public-private partnership” soundbite. Let’s see how it turned out.

Yet since the Utah results were disclosed, questions have emerged about whether the program achieved the success that was claimed. Nine early-education experts who reviewed the program for The New York Times quickly identified a number of irregularities in how the program’s success was measured, which seem to have led Goldman and the state to significantly overstate the effect that the investment had achieved in helping young children avoid special education.

This is Enron-like accounting for preschool kids.

Goldman said its investment had helped almost 99 percent of the Utah children it was tracking avoid special education in kindergarten. The bank received a payment for each of those children.

The big problem, researchers say, is that even well-funded preschool programs — and the Utah program was not well funded — have been found to reduce the number of students needing special education by, at most, 50 percent. Most programs yield a reduction of closer to 10 or 20 percent.

Kind of like replicating the business model of losing money on only one trading day per quarter, but this time in the public sector.

The program’s unusual success — and the payments to Goldman that were in direct proportion to that success — were based on what researchers say was a faulty assumption that many of the children in the program would have needed special education without the preschool, despite there being little evidence or previous research to indicate that this was the case.

“We’re all happy if Goldman Sachs makes money as long as they are making it with smart investments that make a real difference,” said Clive Belfield, an economics professor at Queens College in New York, who studies early childhood education. “Here they seem to have either performed a miracle, or these kids weren’t in line for special education in the first place.”

This is a new low. Even for Goldman. Talk about creative accounting…you take a five year old, pretend he’s mentally challenged and then earn hundreds of thousands of dollars for “curing” the poor soul. All the while patting yourself on the back and gloating about it to the clueless public. I suppose this is the sort of “miracle” Lloyd Blankfein was referring to when he claimed to be doing God’s work.

Indeed, these bonds will be the focus of a conference hosted by the Federal Reserve Bank of Philadelphia on Wednesday, when the mayor of Philadelphia, Michael Nutter, and a representative from the White House will speak, along with the Goldman executive who oversaw the Utah program.

The Fed, the White House and Goldman. Who needs Congress when you have these guys?

More immediately, the apparent overstatement of the Utah program’s results mean that the payments that Goldman — and a philanthropic partner, the  J.B. & M.K. Pritzker Family Foundation — recently received from the state of Utah and the local United Way were probably also higher than they should have been.

I’d love to see a report on Goldman’s profitability excluding taxpayer handouts.

Early-childhood education experts said that the results from Utah should have been viewed skeptically from the start, just based on the amount of money being spent on the program.

And here is how Goldman turned perfectly normal toddlers into money in the bank…

For Goldman, the children identified in this way were crucial to its investment, because the bank was paid for each at-risk child who ended up not needing special education after leaving the preschool program.

But early childhood experts said it made little sense to base Goldman’s payouts on the assumption that all of the children who scored low on the P.P.V.T. test would end up in special education without the preschool.

At the most basic level, the P.P.V.T. is not usually a test used to screen for special education, particularly on its own, education experts said. What is more, non-English-speaking students have been shown to score very poorly on the test when it is administered in English, which is not a sign of any learning disability, but of a need for English instruction.

“To just assume that all these children would have gone to special education is kind of ridiculous,” said Ellen S. Peisner-Feinberg, a senior scientist at the Frank Porter Graham Child Development Institute.

Mr. Innocenti, who administered the tests in Utah, said that from 30 to 50 percent of the children in the preschool program come from homes where English is not the only language. He said the school decided to test the children in English, despite the many non-English-speaking children, because the preschool program is conducted in English.

Before Goldman executives made the investment, they could see that the Utah school district’s methodology was leading large numbers of children to be identified as at-risk, thus elevating the number of children whom the school district could later say were avoiding special education. From 2006 to 2009, 30 to 40 percent of the children in the preschool program scored below 70 on the P.P.V.T., even though typically just 3 percent of 4-year-olds score this low. Almost none of the children ended up needing special education.

Remember what Matt Taibbi famously wrote of Goldman back in 2010?

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates.

Was he wrong?

For related articles, see:

Cartoons Mocking “Goldman Rats” and Hillary Clinton Appear All Over NYC

Goldman and Blackstone Enter Spanish Real Estate – Pain and Suffering for Poor People Immediately Ensues

The Credit Bubble’s “Final Frontier” – Meet Goldman’s Fixed Income Global Structured Covered Obligation

Bank of America Admits – Central Bank Policy Enriched Wall Street While “Steamrolling” Main Street

Video of the Day – Bernie Sanders Says “I Think the Business Model of Wall Street is Fraud”

Introducing the Gigantic and Dangerous Wall Street Loophole You’ve Never Heard of

In Liberty,
Michael Krieger

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