Foundations are peculiar institutions. They lack competition or meaningful regulation. They are perhaps the least accountable institutions in the US. Many want to live forever.
Last week, the Ford Foundation, which has an endowment of $13.7 billion, said that it has decided to borrow another $1 billion to be able to give more money away now to meet the needs of nonprofits that are struggling during the Covid-19 crisis. The announcement was greeted with near-universal acclaim–no surprise, since much of the praise came from those in a position to benefit from Ford’s largesse.
Ford’s president, Darren Walker, has been an influential leader in philanthropy, and a good one. He put challenging inequality at the center of Ford’s work. He got the foundation to make unrestricted long-term grants to nonprofits, as part of an initiative called Build. He persuaded Ford’s trustees to invest a share of the foundation’s endowment to do good, as opposed to simply investing to maximize returns.
Yet the decision to borrow $1 billion to meet current needs puzzled me. How confident can we be that today’s needs are more important than tomorrow’s? And if a foundation decides to spend more now than the customary amount — legally, they are required to spend or give away at least 5 percent of their assets — why borrow money to do it? Why not just spend some of the endowment, if this, is, indeed, an emergency?