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DOJ Claims it Will Stop Using Private Prisons...Eventually

Private Prisons Profit From Caging People

In a memo from US Deputy Attorney General Sally Yates penned Thursday, August 18, 2016, a plan is outlined to phase out the use of privately owned for-profit prisons. The news of this memo caught wind and people have been praising the decision on social media.

Word spread to Wall Street where there was massive sell-offs of the two largest private prison stocks Corrections Corp of America (CXW) and GEO Group (GEO). CXW stock dropped 39.36% within hours of the announcement and GEO 40%. A rather massive crash for two booming stocks. Zero Hedge covered the crash here. The sell-off panic was certainly unwarranted as DOJ use of private prions is a mere 7% of GEO groups' profits.

It appears Wall Street has begun to realize how insignificant this recent announcement is as GEO is up 11.28% within ten minutes of the market opening this morning and CXW 9.85%. Good news for the brave investors who doubled down during yesterday's crash.

GEO group stock is rebounding amazingly fast this Friday morning despite the DOW, NASAQ, and S&P 500 opening in the red. The main reason for GEO's soaring stock prices the morning after this major crash is probably that the Federal Bureau of Prison (BOP) renewed a contract with GEO for ten years.

It appears the majority of people still don't truly understand how minor the DOJ announcement is.

As I already pointed out, this affects a very small fraction of inmates (11%) that are being held in private prisons by the DOJ. The vast majority of the American prison system is State operated. Further, anyone who has ever visited a FedEx store and the Post Office can tell you that the private tends to do a better job the Government. I cannot even name a single time the Government has out performed the private sector in anything. The US military even outsources war to private contractors now. So the tremendously small fraction of inmates that will be moved from private prisons to State facilities should not be expecting better prison conditions. It is a ridiculous stretch to call this prison reform.

Profit from pain is inhumane

DOJ already has a lot of contracts with prison prisons. There are prisons currently being constructed as part of DOJ contracts with private prison companies. Even if the DOJ never makes a new contract with a private prison company it will be around 10 years until the current contracts expire. Corrections Corporation America already has a $250 Million 20 year contract with the Federal Government that guarantees the Government maintain the prison occupancy at 90%. In other words, private prisons aren't going away any time soon.

Moreover, even if DOJ stops using private prisons for the very small portion of the inmate population under their jurisdiction, more and more States are contracting with private prison companies to operate their facilities. Many states have contracted to keep the private prisons at 90 or even 100% capacity.

The US still incarcerates more people that any other country and the number is only rising. Cutting the private sector out of the prison industry is not great news for the American taxpayers who will have to pick up the tab.

Private Prisons will live on. This announcement will not help anyone currently being detained by ICE in a private for profit prison.

Caging Humans


We need to look at the larger picture here. The issue is not WHO is caging humans but the fact that humans are being caged! It is insane. We lock other people who never hurt anyone in cages like animals for breaking arbitrary rules.

Since I starting writing this post GEO is +12.66 and CXW is +9.56

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