Banking behemoth JP Morgan Chase recently announced that it will no longer finance the private prison industry. The largest United States bank in terms of assets is following the lead of other well-known banks that have stopped such financing.
JP Morgan Chase was involved in the financing of loans to CoreCivic Inc and GEO Group Inc., two of the largest private prison companies in the country. Until October 2016, CoreCivic was known as Corrections Corporation of America.
While JP Morgan Chase’s official reason to stop financing this sector was due to “ongoing evaluations of the costs and benefits of serving different industries,” as a representative told Reuters, it also occurs after activists targeted CEO Jamie Dimon about the bank’s prison financing at the last two annual board meetings.
Dimon’s New York City townhouse has also been the scene of protests by anti-prison financing activists. Such protests have skyrocketed ever since the Trump administration reversed President Obama’s policy of phasing out the federal use of private prisons, and its increase in the use of privately operated detention facilities for separating the families of undocumented people.
Approximately two-thirds of those held by U.S. Immigration and Customs Enforcement (“ICE”) are placed in private detention centers, although some sources put the numbers as high as three-quarters.
Wells Fargo Reducing Relationship with Private Prisons
Other giant banks rethinking positions on private prison finance include Wells Fargo, which was among several banks raising $1.8 billion in 2018 for GEO Group. Inc. and CoreCivic, Inc.
In January 2019, Wells Fargo announced a reduction in its financing of the prison industry, stating it was no longer “actively marketing” to that sector and that its credit exposure to the industry had declined, and that decline was expected to continue.
While protests may make a difference, banks always make decisions based on their bottom lines. Moody’s Investor Services – most often referred to just as Moody’s – is the top bond credit rating business, and the firm has rated CoreCivic and GEO Group’s bonds as “speculative grade,” the polite term for junk bonds.
These junk ratings are based on the fact that private prisons are especially vulnerable to political changes and the unwelcome publicity regarding separating parents from children.
Private Prisons and Detainees
Overall, private prisons account for just nine percent of the U.S. prison population, but it is the holdings of detainees that have brought activist pressure to bear on banks. Activists have protested those companies seen as legitimizing the Trump administration’s policy of forcibly separating children and parents.
On Valentine’s Day, an immigrants’ rights organization – complete with a mariachi band – protested in front of Dimon’s home with signs reading “Break Up with Prisons.” Such groups say that targeting banks was a “new frontier” in the immigrants’ rights campaign. In May 2017, several people were arrested on charges of blocking the Manhattan headquarters of JP Morgan Chase.
A Disappointing Decision
A CoreCivic spokesman told Reuters that JP Morgan Chase’s decision was “disappointing,” and blamed it on “false information characterized by politically motivated special interests.” He also claimed the company doesn’t house children away from their parents. A spokesman from the GEO Group said a similar thing regarding the housing of unaccompanied minors.
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