British bankers: another slap in the face

Fred Goodwin built the Royal Bank of Scotland into Britain's largest bank in the bubble years and was given a knighthood in 2004 for "services to banking." Goodwin then drove RBS over a cliff in the crash, leaving the British taxpayer to pick up the bill – so far £45 billion ($ 71.6 billion).

Yesterday it was announced that Sir Fred would revert to being plain, old Fred. The papers will probably continue to call him by his pre-kinghthood nickname of "Fred the Shred" for his slash and burn approach to management.

It was conservatives who led the charge to have Goodwin's knighthood taken away. George Osborne, Chancellor of the Exchequer, applauded the decision, "RBS came to symbolise everything that went wrong in the British economy over the past decade."

It should be noted that at the time, neither Osborne, nor British Prime Minister David Cameron raised the slightest objection to Goodwin's honor, nor did they spot that banking was using the no-touch regulation of the City of London, to create an unsustainable bubble in housing and credit. They said nothing until after the bubble burst. But then, so did everybody else.

Knighthoods are conferred by the Queen at the recommendation of the government. They make news mostly when conferred on entertainers like Sir Elton John or Sir Mick Jagger or Dame Judi Dench or Dame Helen Mirren. But mostly they go to senior civil servants, heavyweight political funders and captains of industry, like Goodwin.

A special honors committee of five senior civil servants made the decision to strip Goodwin of the knighthood. The banker now joins the likes of Zimbabwe's Robert Mugabe and the late spy Antony Blunt among those who have lost the right to be called "Sir."

This is the second slap at a leading banker in recent days. Last week, as I blogged, Goodwin's successor at RBS, Stephen Hester, returned his annual bonus for last year – £1 million ($1.56 million).

Public opinion is driving these gestures – and really, that is all they are, gestures. Serious reform of the banking industry and stricter rules on the quite obscene bonus culture that still rules in financial services and other areas of business have not been enacted here – or for that matter in New York.

Gesture politics in this matter is the equivalent of feeding hungry people candy bars. It gives them a short sharp burst of energy satisfaction but no nourishment. Eventually, the sugar high wears off, and then what will the government do?

Simon Jenkins at The Guardian, gadfly establishment man, has some ideas – not for government but for businessmen themselves to deal with the situation. He points out, "Capitalism, like democracy, needs constant self-examination to retain its vitality."