President Donald Trump’s Attorney General Jeff Sessions has rescinded a memorandum aiming to end the Justice Department's use of private prisons, providing another huge boost to the companies involved in supplementing U.S. detention facilities.

In a directive sent to the acting Federal Bureau of Prisons Director Thomas Kane, Attorney General Jeff Sessions wrote that his predecessor’s efforts to reduce the use of private prisons “impaired the bureau’s ability to meet the future needs of the federal correctional system.”

The rescinded memo was authored by Deputy Attorney General Sally Yates and affected 13 private prisons. It did not concern private prisons run by other federal agencies like the Department of Homeland Security or U.S. Immigrations and Customs Enforcement (ICE). The Obama administration had decided to act on a report about private prisons from the DOJ’s inspector general, which documented a number of issues including violence between inmates and staff, poor security, overcrowded conditions and overreliance on solitary confinement.

Better Times Ahead for Prison Stocks

Shares of CoreCivic, formerly Corrections Corp of America (CXW), and GEO Group (GEO) soared on the news that the Department of Justice (DOJ) now officially plans to spend more on private prisons. Investor interest in both companies has been on an upward trend since President Trump was elected in November. This improving sentiment has mainly been driven by the new president’s tough stance on criminals and preference to quickly detain undocumented immigrants living in the country before deporting them. (See also: Prison Stocks Soar Following Trump Election.)

Fresh hope that companies operating in the private prison industry are set to return to making major profits represents a sharp change in fortune for the likes of CoreCivic (CXW) and GEO (GEO). Last August, shares in both companies plummeted after it emerged that the DOJ planned to gradually phase-out private prisons to coincide with declines in the U.S. prison population. (See also: Private Prison Stocks Hammered by DoJ Phase-Out.)



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