Reading the history of Joe Cassano's stewardship of AIG Financial Products, one thing -- aside from the frequent lying about the lack of risk in the bets AIGFP was laying on -- stands out: The entire unit's strategy rested on one principle -- leveraging the AAA rating of the original AIG insurance business.
Of course, leveraging was threaded through the AIGFP business model, but without that gold-plated credit rating for the parent company, none of the rest of the shenanigans would have been possible. And, at first glance, this seems like a quintessentially Wall Street maneuver.
Which is why first glances are often wrong. What Joe Cassano was doing was built on two decades of Madison Avenue-bred practice: brand extension. What's brand extension? We see it all around us. You liked Colgate dental cream -- the original toothpaste? What about Colgate Whitening Formula toothpaste? You liked V-8 juice once upon a time? What about V-8 soups? Starbucks coffee got you going, so why not Starbucks ice cream? Or Starbucks Music?
Brand extension was the primary impetus for new stuff during the last twenty years -- taking a popular brand name and extending it to a new product, or range of products, or services, so that the latter could borrow, trade upon, the "brand equity" -- or consumer approval -- of the former.
All Joe Cassano was doing was brand extension, with a twist -- he took not only the equity of the AIG name, but the credit rating that went with it. A lot of what Wall Street did began and ended there, but brand extension was born on Madison Avenue, and lives -- it would appear -- through the meltdown. How else explain the TV commercials for GMAC bank?