After coming to the conclusion that the private-prison industry is very risky, JPMorgan Chase & Co. (JPM - Free Report) decided to refrain from financing the industry. This move comes as part of the bank’s evaluation process of the different sectors it serves to understand costs and benefits related to each of them.
Per a person familiar with the matter, the bank has decided to stop extending new financing to private operators of prisons and detention centers, and also wants to get rid of its existing credit exposure to the industry at the earliest.
This change comes after increased scrutiny. Various activists and protestors urged JPMorgan’s CEO, Jamie Dimon, to stop backing the prison industry and challenged him regarding financing of such companies.
Activism against the financing of the private-prison industry increased after reports came out that under the Trump administration policy minors were being separated from their adult parents.
CoreCivic Inc. and GEO Group Inc. are two major private prison operators in the United States. JPMorgan is one of the several banks that provide financing to these companies. The bank has been underwriting bonds and syndicating loans for them since the past few years.
After getting to know JPMorgan’s decision, Steven Owen, a spokesman for CoreCivic called it “disappointing.” He said, “Decisions like this are being based on false information spread by politically motivated special interests, who completely mischaracterize our company.”
In fact, CoreCivic added that the company doesn’t know the “circumstances of individuals when they are placed in a facility, and our responsibility is to care for each person respectfully and humanely while they receive the legal due process to which they are entitled.”
Moreover, a spokesman for GEO Group stated that the company “has never managed facilities that house unaccompanied minors. We welcome the opportunity to have an open dialogue with all financial institutions to address the common mischaracterizations of our company’s role and record as a government services provider.”
Apart from JPMorgan, Bank of America Corporation (BAC - Free Report) , Wells Fargo & Company (WFC - Free Report) , Citigroup Inc. (C - Free Report) and a few others also bank the prison industry.
Shares of JPMorgan have declined marginally over the past three months. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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