New Report Examines How Country’s Largest Banks Finance the Private Prison Industry
By Manuel Madrid | Nov 17, 2016
When Donald Trump won and private prison stocks surged, an unexpected cheer came from downtown Manhattan. It’s a great time to be in the jail business.
A new report by the progressive advocacy group In the Public Interest reveals the troubling ties between Wall Street and the private prison industry, including hundreds of millions of dollars in loans and revolving credit. Shares of the private prison industry’s two biggest companies, CoreCivic (formerly known as Corrections Corporation of America) and GEO Group, rocketed after Trump’s win. Bondholders on Wall Street, who raked in tens of millions in interest payments from CoreCivic and GEO Group in 2015, seem confident that Trump will make good on his campaign promises of mass incarceration and deportation.
Last year, the industry’s two biggest companies, CoreCivic (formerly known as Corrections Corporation of America) and GEO Group, reported $1.79 billion and $1.84 billion in revenue, respectively. Of the many Wall Street banks involved in financing the growth and expansion of private prisons, ITPI noted that six represent the majority of those investments: Bank of America, JPMorgan Chase, BNP Paribas, SunTrust, U.S. Bancorp, and Wells Fargo.
According to the report, the banks underwrote bonds for CoreCivic and GEO Group and helped finance them through a combination of term loans and hundred of millions of dollars in revolving credit. This financing allowed the companies to expand and gave the banks a sweet return on their initial investments.
GEO Group and CoreCivic have long since been reading the writing on the wall for private prisons. They figured the “tough on crime” mindset was on its way out and spent years expanding into “community services” like halfway homes and electronic monitoring devices, thanks to their Wall Street financing. To stem the growth of the private prison industry, ITPI wants to see shareholders and other clients of these banks like universities, municipalities, and states pressure bank officials to stop extending revolving credit, awarding term loans, and underwriting bonds to these private prison companies—if bank officials do not move to do so themselves.
Meanwhile, prison divestment campaigns around the country have dug in their heels. “We can’t rely on the federal government,” says Enlace deputy director Amanda Aguilar Shank, who helped organize Portland, Oregon’s Prison Divestment Campaign. “We need to have local elected officials stepping up with the community and taking protective measures. Portland could be the first city in the country to completely divest from banks like Wells Fargo and JPMorgan Chase
In the face of a likely resurgence of interest in the industry, prison divestment advocates are also turning their attention to local institutions. Last year, Columbia University became the first university in the country to divest from private prisons, selling all of its CoreCivic shares in response to a student activist campaign. A few months later, the University of California followed its lead. #ForgoWells is a budding coalition of divestment advocates who have condemned Wells Fargo’s “destructive and extractive” investments in for-profit prison companies. “It doesn’t matter if you’re a Trump voter or a Clinton voter,” says Jeff Ordower, who works with the #ForgoWells campaign “This is a bipartisan movement to hold the banks accountable for what they’re doing.”
Private prisons, which account for 6 percent of state and 16 percent prisoners in the country, have been lambasted by critics for their understaffing and poor medical care as well as their high rates of recidivism. Yet, the future of private prisons was at risk not too long ago. In August, the U.S. Department of Justice announced it would begin phasing out the use of private prisons. However, this decision could be easily rolled back by the incoming Trump administration. In addition to deporting undocumented immigrants, Trump, who ran as a “tough on crime” candidate, has promised to reduce “surging crime, drugs and violence” and boost funding for police and federal law enforcement agencies.