SANTA BARBARA, CA - JUNE 12: The Santa Barbara County Detention and Correctional Facility, one of two jails where singer Michael Jackson could be sent if the deliberating jury declares him guilty in his child molestation trial, is seen on June 12, 2005 in Santa Barbara, California. Jackson is charged in a 10-count indictment with molesting a boy, plying him with liquor and conspiring to commit child abduction, false imprisonment and extortion. (Photo by David McNew/Getty Images) (Photographer: David McNew/Getty Images)

Private prisons are the $4 billion industry at the intersection of debates in the U.S. over illegal immigration and governmental approaches to drug violations. Prison corporations now are being targeted for reproval by lenders and candidates hoping to defeat President Donald Trump, whose administration reversed a plan to reduce reliance on them. The scrutiny is due to the outsize role private prisons play in detaining arrested migrants and growing questions about their effectiveness, safety record and political influence.

1. Why does the U.S. use private prisons?

Modern private prisons were born of a need to house a growing prisoner population resulting from the U.S. government’s “War on Drugs,” a campaign beginning in the 1970s to increase and enforce penalties for drug offenses. The first U.S. contract was in 1984. The theory was that prison companies could alleviate overcrowding and save governments money by operating more efficiently. At the end of 2017, private prisons held 8% of all inmates at the state and federal level, and a higher share -- 15% -- just of federal prisoners. From 2000 to 2016, the U.S. prison population grew 9%, but the number of inmates held in private facilities increased 47%, according to the advocacy group The Sentencing Project. Among arrested migrants, the number in private centers swelled more than five-fold.

2. Do other countries use them?

Yes, governments across the globe followed suit and contracted with for-profit prison operators. Australia, England and Wales, and New Zealand all house higher proportions of their prisoners in private facilities, but by sheer numbers the U.S. is unmatched. Whereas contracts in the U.S. often build in incentives for keeping private prison beds full, countries such as New Zealand pay operators based on factors including reduced recidivism.

3. What are the objections to private prisons?

For one thing, the level of safety and security incidents is higher in private prisons than in those run by the federal government, according to a 2016 review by the U.S. Department of Justice. In Australia, the government of Queensland state announced in March that it would resume control of its two privately run prisons, citing an elevated number of assaults on employees that was attributed to lower levels of staffing. More broadly, critics of private prisons argue that it’s morally repugnant for corporations to profit off the incarceration of people and that cost considerations should not be paramount in considerations of criminal justice.

4. Do private prisons save money?

We don’t know. There’s conflicting data. U.S. Bureau of Prisons data on the costs of detaining federal inmates classified as low-security (as most prisoners in private facilities are) show savings. However, studies authored by other government agencies and academics have been inconclusive or cast doubt on the idea that privatization saves money. What’s more, a recent study found that because judges perceive private prisons as cheaper, they’re more likely to sentence inmates to longer terms.

5. What’s the role of private prisons in housing migrants?

U.S. Immigration and Customs Enforcement has detained record numbers of undocumented immigrants under the Trump administration. Most of those people were housed in private facilities; the National Immigrant Justice Center estimated the figure at 71% as of late 2017, based on data from ICE. In response to a public outcry over the separation of children from their parents at the border, private operators underscore that their facilities for arrested immigrants do not house unaccompanied minors.

6. What do Trump’s rivals say?

Joe Biden was vice president in the Barack Obama administration when it announced plans to phase out private prisons at the federal level. Democratic Senators Kamala Harris, Cory Booker, Elizabeth Warren and others have opposed private prisons. Warren proposed a ban on their use federally as well as increased oversight over lucrative contracts to sell prisoners services such as email and phone access. She has suggested withholding federal public safety funding as a means of forcing states to stop using private prisons. Critics say the industry has undue influence as a result of its lobbying efforts; in the 2016 election private prisons gave $1.6 million to candidates, parties and outside groups, double its 2012 spending, according to the Center for Responsive Politics.

7. What have lenders done?

BNP Paribas SA, SunTrust Banks Inc., Bank of America Corp., and JPMorgan Chase & Co. are among the major banks that have recently halted financing to private prisons and immigrant holding facilities amid pressure from protesters and lawmakers. As of April 2019, about a dozen banks had extended credit totaling $2.7 billion to the largest U.S. for-profit prison operators.

8. How have private prison companies responded?

In mid-July, weeks after Warren announced her plan, stocks of the two largest for-profit prison corporations, GEO Group Inc. and CoreCivic Inc., sank to their lowest values in months. The companies argue that with more prisoners than prison beds in the U.S., shuttering private facilities is unlikely and would be logistically challenging.

To contact the reporter on this story: Nic Querolo in New York at jquerolo1@bloomberg.net

To contact the editors responsible for this story: Elizabeth Campbell at ecampbell14@bloomberg.net, Lisa Beyer, Shruti Date Singh

©2019 Bloomberg L.P.