This paper addresses the question what the fundamental nature and mode of being of institutional reality is. Besides the recent debate with Tony Lawson, Barry Smith is also one of the relatively few authors to have explicitly challenged John Searle's social ontology on this metaphysical question, with Smith's realism requirement for institutions conflicting with Searle's requirement of a one-world naturalism. This paper proposes that an account of institutions as powers or dispositions is not only congenial to Searle's general account, but (...) can also satisfy both the realism and the one world requirements. Searle's worry that such a dispositional account is unable to account for the deontic nature of institutions is countered by an appeal to higher-order powers as well as Searle's notion of the gap and desire-independent reasons for action. (shrink)