Bank Of America Divests from Private Prisons; Your 401K May Be a Different Story

Bank of America Corp announced last week that it would stop doing business with private prisons. They are the latest high-profile institution to cut ties with the controversial industry, as both JPMorgan Chase & Co. and Wells Fargo have also stopped loaning money. What happened? Reports about human rights violations at private prisons reached a fever pitch recently as the Trump administration has used the facilities to detain immigrants seeking asylum. Attention ramped up as immigration lawyers and politicians visited to find scenes of massive overcrowding and grim conditions for children at detention centers. How did we get here? A $4-billion-a-year industry, private prisons house only about nine percent of the country’s total prison population. The rest? Detained immigrants. It’s lucrative: Former President Obama pledged to phase out private prisons and stocks fell 40%. When Trump took office, he reversed the move and share prices rebounded. What’s next? While outcry from the public and investors has seemingly worked in getting big banks to stop funding private prisons, it’s tricker for asset firms like Vanguard and Blackrock to divest from prison companies like GEO Group and CoreCivic. The firms’ shares in the prisons are included in the 401k retirement funds and IRAs of millions of customers. Vanguard told CNN it would be “impractical” to divest. Activist group Educators for Migrant Justice, is now pressuring major pensions like California Public Employees’ Retirement Systems and State of Oregon Public Employees Retirement System to stop including GEO Group and CoreCivic in their funds. Neither pension group has responded. -Michael Tedder photo: REUTERS / CARLO ALLEGRI