The recent economic turmoil, and virtual imposion or acquisition of a number of celebrated financial institutions, raises interesting questions about the value of brand equity. In short, what is it really worth in times of crisis?

For years we’ve heard that a strong brand provides a cushion of goodwill in difficult times and allows firms to charge a premium for their products and services. There is a great deal of empirical evidence and logic to support that theory, but then what happened on Wall Street the past month? Firms like Lehman Brothers, AIG and Merrill Lynch have spent billions over the years burnishing their reputations and had what appeared to be strong brands supported by long histories. (Newcomers like WaMu and Countrywide were also big advertisers, but most would agree their positioning with customers was less solid and mature.) But those celebrated financial brands held little or no value when customers and investors began to doubt their liquidity and/or business acumen. Their reputation – built over years of consistent performance and marketing muscle – did little to slow or stop their disappearance. Whatever inherent confidence customers had in these customers was apparently fragile and transitory.

One could make a case that firms like Morgan and Goldman Sachs have survived the crisis partly due to their strong reputations – and brand equity – but their survival could also be due to smart management and a few lucky guesses on investments. And it’s certainly true that brands cannot survive serious strategic mistakes or bad financial bets. But the very brand essence of these firms was trust. Was all the marketing a waste of money?

I think the answer lies in the fact shaken consumers have lost trust in a wide range of institutions – not just Wall Street firms – and that goodwill and reputation is more ephemeral than ever. Furthermore, I believe the companies that have disappeared all did serious damage to the trust equity they had built by selling, promoting and investing in financial products built out of smoke and mirrors. When customers realized these firms had peddled risky products, they lost confidence and fled to higher ground – both for self-interest but also likely as a punishment for a breach of trust. Strong brands will still do better than others in most circumstances, but a powerful brand is not a guarantee of safe harbor in difficult times.