No matter who is responsible for hiring Phacil, the Treasury should avoid using contractors that openly seek to "withhold information from release to the public." That's essentially the opposite of transparency.



How a 36% Return Is Really a 5.6% Return

Finally, the Treasury also appears to have engaged in a little more creative accounting regarding their toxic asset portfolio. Bloomberg recently reported that the securities had a 36% return. (Update: Treasury says that they estimated the return between 19% and 52%) That sounds great, right? It was so good that we noted the finding yesterday. But Ash Bennington from CNBC's NetNet talked to a finance professor, Dr. Linus Wilson University of Louisiana at Lafayette, who questions this calculation:

Dr. Wilson began by explaining the derivation of the 36% figure: "If you take a simple average of the eight fund returns, you get a 36% annualized return. That's what Bloomberg did." But, according to Wilson, there are other factors which must be accounted for in calculating the actual rate of return. "Two thirds of the taxpayer's investment is in debt: Taxpayers are receiving a meager 1% return on two thirds of their investment -- only the one third that is in equity is doing well."

From that, it sounds like he says Treasury is taking a simple average instead of a weighted average. Wilson says they're also annualizing returns in a way that makes them look twice as nice. But again, this all boils down to whose math and calculations you believe. Unfortunately, since the Treasury doesn't release the detail about the securities they hold (as Bloomberg can attest to!), it's hard to get a clearly valid third-party confirmation of its claims.



If the Treasury really is out for better transparency, then it certainly should approach these situations differently. For the performance of its holdings, it should provide accurate, plausible best-case and worst-case scenario estimates compiled by unbiased third-party sources -- not just its own optimistic view of how things will turn out. Moreover, if there's some good reason it cannot provide information to reporters, then it should provide that reason -- not worthless e-mails that may have been compiled by a firm hiring its employees based in part on their talent for skirting disclosure. These methods of obscurity are the opposite of what Americans were told to expect from President Obama.

Update: From Treasury:



Treasury initially contracted with Phacil-for FOIA support-during the Bush Administration, in late 2007. The Phacil contract was awarded pursuant to a sole-source process (through the SBA 8(a) program). The original contract was for one year. Treasury exercised two additional one-year options on the Phacil contract. The contract expired on September 12, 2010. Main Treasury (DO) does not have any current contracts with Phacil. However, we understand that Phacil may work as subcontractor pursuant to an existing agreement between Treasury and Central Research, Inc. for FOIA support. The Bureau of Engraving & Printing has a separate contract with Phacil for "HR Support Services."

Perhaps it's good that the contract has expired, but it was almost certainly in place over the period that the Bloomberg inquiry was being "answered," and renewed at least once under the Obama administration.