Mr Goodwin was in charge of RBS in the run-up to its near collapse in 2008 The decision to strip former Royal Bank of Scotland boss Fred Goodwin of his knighthood has been criticised by business and some political figures.
Ex-Labour chancellor Alistair Darling said the decision appeared to have been taken "on a whim" - as Mr Goodwin was not the only banker to cause problems.The Institute of Directors warned of creating "anti-business hysteria".
Mr Goodwin was RBS chief executive in 2008 when the bank's near-collapse prompted a £45bn taxpayer bailout.
The Queen cancelled and annulled the title on the advice of the forfeiture committee - whose members include top civil servants and the head Treasury lawyer - a decision welcomed by party leaders.
'Obscure' process It followed a clamour for Sir Fred to be stripped of the title, awarded for "services to banking" under the previous Labour government in 2004.
But Mr Darling, who as Labour chancellor led negotiations over the RBS bailout, said he was concerned about the "obscure" process used to annul the knighthood and said there should be a clear set of principles on which decisions are based.
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Here in one of Scotland's smartest suburbs there is some sympathy for Fred Goodwin.
He was last seen late on Tuesday afternoon, sweeping out through the electronic gates of his large house in The Grange in a black Jaguar.
There are plenty of bankers behind the high walls of these tree-lined streets who feel that Mr Goodwin's treatment has been harsh.
Yes, they say, he was an arrogant, hubristic dealmaker but at a time when arrogant, hubristic dealmakers were all the rage, feted by many of the same politicians who are now cheering his downfall.
As RBS chief executive, Mr Goodwin cemented Edinburgh's reputation as a financial powerhouse, to the delight of staff and shareholders who grew rich, on paper at least.
The Treasury was more than happy to take and spend the millions of pounds in taxes paid by RBS.
For others though, including some of the more old-fashioned bankers in the Scottish capital, many of whom lost fortunes when boom turned to bust, Fred Goodwin deserves the opprobrium.
He was the epitome, they argue, of what went wrong with banking, helping to turn an industry with a reputation for being safe, solid and secure into a casino.
Either way, when the crash came, Sir Fred had the farthest to fall.
He was last seen late on Tuesday afternoon, sweeping out through the electronic gates of his large house in The Grange in a black Jaguar.
There are plenty of bankers behind the high walls of these tree-lined streets who feel that Mr Goodwin's treatment has been harsh.
Yes, they say, he was an arrogant, hubristic dealmaker but at a time when arrogant, hubristic dealmakers were all the rage, feted by many of the same politicians who are now cheering his downfall.
As RBS chief executive, Mr Goodwin cemented Edinburgh's reputation as a financial powerhouse, to the delight of staff and shareholders who grew rich, on paper at least.
The Treasury was more than happy to take and spend the millions of pounds in taxes paid by RBS.
For others though, including some of the more old-fashioned bankers in the Scottish capital, many of whom lost fortunes when boom turned to bust, Fred Goodwin deserves the opprobrium.
He was the epitome, they argue, of what went wrong with banking, helping to turn an industry with a reputation for being safe, solid and secure into a casino.
Either way, when the crash came, Sir Fred had the farthest to fall.
He questioned the idea that the decision had been undertaken independently, telling the BBC: "Committees can see the way the wind is blowing. I think the minute he was referred, the outcome was inevitable.
"I'm not here to defend Sir Fred... I just think we're getting into awful trouble here if we go after people on a whim and we don't have a clear set of principles against which we can judge people, it's not right."The Institute of Directors (IoD) warned of politicians creating "anti-business hysteria" over the matter. Its director-general Simon Walker told the BBC removing a knighthood because "you don't approve of someone" without there being any criminal conduct "politicises the whole honours system".
In the past, only convicted criminals or people struck off professional bodies have had knighthoods taken away.
Former Confederation of British Industry chief, a former trade minister under Labour, Lord Digby Jones said there was "the faint whiff of the lynch mob on the village green" about the decision.
However, he added he did not disagree with the end result to strip the honour.
Former Formula 1 world champion Sir Jackie Stewart - a friend of Mr Goodwin - said he thought the former bank boss had been made a scapegoat.
'Boardroom culture' "No single person or even any single bank created the biggest financial recession in modern times," he said.
But a Cabinet Office spokesman said the "scale and severity of the impact of [Mr Goodwin's] actions as CEO of RBS made this an exceptional case".
The Financial Services Authority (FSA) and the Treasury Select Committee had judged the failure of RBS to have contributed to the 2008 financial crisis and subsequent recession, he said.
Deputy Conservative deputy chairman Michael Fallon said it was wrong to suggest there had been political interference.
He told BBC Radio 4's Today programme: "Ministers don't control the timings of the forfeiture committee, this is an entirely independent committee of civil servants."
'Public demand' He also rejected suggestions it had been "done on a whim" - saying it had been three and a half years since the near-collapse of RBS and followed a detailed report by the FSA.
And he suggested other bankers could yet face similar consequences: "I think there's going to be a report now from the FSA into the HBOS/Lloyds disintegration - so who knows what will follow from that?
"But this was the biggest bank, [Mr Goodwin] was the dominant player in it and I think the public rightly feel [he] got away scot free at the time. He walked off with this vast pension and we've had this persistent demand from the public as to why this man should be allowed to retain an honour he was given for services to banking."
"It is right that Fred Goodwin lost his knighthood but I think it is only the start of the change we need in our boardrooms," the Labour leader said.
Deputy Prime Minister and Lib Dem leader Nick Clegg said it had been the "right decision".
The Unite union welcomed the move but Simon Chouffot, from the Robin Hood Tax Campaign which argues for increased taxation of the financial sector, said others should face similar consequences.
Mr Goodwin oversaw the multi-billion-pound deal to buy Dutch rival ABN Amro at the height of the financial crisis in 2007, which led to RBS having to be bailed out to the tune of £45bn by taxpayers.
There had been a growing clamour for him to be stripped of his honour following thousands of job losses at RBS and in the banking industry, and the impact on the wider economy.
The BBC's business editor Robert Peston said Mr Goodwin was in a "class of his own" in terms of the risks that he took at RBS - reflected in the size of the bailout required to rescue the company.
In 2009, Mr Goodwin, who received an annual pension of £650,000 - later reduced to £342,500 - after leaving the bank, told a committee of MPs he "could not be more sorry" for what had happened.
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