Among the investors bailing out Citigroup with new equity capital is The Weill Family Foundation, a charitable foundation set up by Sandy Weill.
Now the way that these charitable foundations work, they generally give away some small amount (maybe 5%) of their assets each year – often the minimum needed to retain their charitable status. Most of their funds they can essentially do with as they please, so long as it can be reasonably spun as an "investment". The idea is that if you invest the funds well, they will grow, and therefore be able to have even greater charitable effect when they are finally given away at some unknown point in the future. In practice, many foundations become self-perpetuating, and never even reduce the size of their investments, let alone give them all away.
Nevertheless, the investments are being made for the charitable beneficiaries of the foundation, and not for the benefit of the people who set the foundation up.
Which is why this investment smells a little fishy to me. Sandy Weill retains a huge personal stake in Citigroup. Citigroup needs capital. And so Sandy Weill takes a large chunk of his family foundation’s investments, and injects it into the Citi recapitalization – thereby helping to shore up his own, personal, stake in the company.
I can see how this is a good thing for Sandy Weill, and I can see how this is a good thing for Citigroup. But I’m far from convinced that this is the best possible thing for the recipients of the Weill foundation’s charity.
Last year, I criticized the Gates Foundation for failing to invest its funds with an eye to the wellbeing of the people the foundation was designed to help. The same criticism, I think, can clearly be made in this case as well.
I think it’s great that rich individuals set up charitable foundations. But if you’ve given your money to charity, then you shouldn’t be able to use that money for your own personal benefit.