Homeland Security Reportedly Needs More Beds For Immigrant Detainees In Big Windfall For Private Prisons
Prison stocks have been rallying since the Nov. 8 presidential election. A rumor out last weekend may have just added strength to the recent rally.
Trump Prop For Prison Stocks
The GEO Group Inc (NYSE: GEO) and Corecivic Inc (NYSE: CXW) are advancing strongly on Tuesday after a Reuters report suggested that the Trump administration is seeking to increase detention space in private prison companies such as GEO Group and CoreCivic to accommodate the detainees who fail to clear the credible fear test and are awaiting deportation.
Related Link: Prison Stocks Still Facing Headline Risk Despite GEO Group's Federal Contract Renewal
New Guidelines In The Offing?
The report said the Department of Homeland Security has discussed new guidelines prepared for immigration agents in a draft memo dated Feb. 17, which is yet to be circulated to field officers.
The new guidelines reportedly help the field officers or border personnel to approve only those applications who stand a good chance of ultimately getting asylum. On Jan. 25, Trump signed an executive order, calling for the tightening of border security.
The guidelines also expand the categories of people who could be deported. In addition to recent arrivals and convicted criminals, who were the prime targets previously, the new plans call for including migrants charged, but not convicted and the illegal immigrants who have been in the country for many years.
However, the guidelines do not give specific criteria to establish credible fear of persecution if sent home. Credible Fears is defined under the Immigration and Nationality Act as "a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion."
The current practice, called catch and release, is those asylum seekers who fail the credible fear test or quickly deported unless they file an appeal. Those who pass the test are released and they are allowed to stay in the United States awaiting hearings that could run for years together, given the huge number of backlogs pending in the immigration courts.
Even when immigrants are earmarked for quick deportation, it takes time and coordination, as the deportee's home country needs to be contacted for their concurrence and transportation is complicated and expensive.
Expanding The Detention Space
Consequently, the Homeland Security Department is aiming to increase detention space by 8,000 beds. However, the financing part for the expanded detention space needs vetting by Congress. Citing a Congressional aide familiar with the administration's plans, the Reuters report said the Department of Homeland Security is contemplating to expand its contracts with private prison companies such as GEO Group and CoreCivic.
Commenting on the report, Height Securities said: "The proposal will require additional appropriations from Congress, so it is not a done deal and could be blocked by Senate Democrats particularly if the Trump administration packages the request with money for the Mexico border wall in the spring defense supplemental currently under development by the Pentagon.
"But it seems likely at least some of the needed money will materialize during the appropriations process this year, as part of the FY17 CR/omnibus, supplemental for FY17, and/or FY18 regular appropriations. The draft proposal, while not yet official, should not come as a surprise given this Administration's policies and rhetoric around immigration that is clearly positive for the private prison operators", the firm added.
At Time Of Writing
The GEO Group was moving up 2.02 percent to $46.05.
CoreCivic was rallying 3.80 percent to $34.01.
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