In the good times he was the doyen of British banking. Wealthy and courted by decision makers and knighted by Queen Elizabeth for services to his industry, Sir Fred Goodwin, head of the Royal Bank of Scotland (RBS), seemed invincible.

But then the financial crisis struck in 2008 and his one-time provincial bank – which had grown to be one of the world's biggest under his leadership – had to ask for a £43 billion ($68 billion) government bailout, effectively nationalizing it.

Sir Fred, with his reputation for arrogance and cost-cutting, earning him the nickname "Fred the Shred," is a household name. An affair with a senior colleague, which he tried to keep quiet through the courts, and a £342,000 ($545,000) annual pension – reduced from £703,000 ($1.1 million) only after public outcry – only added to the public image.

This week the government stripped him of his knighthood for his role in the bank's failure. He now joins the ranks of an unlamented group of former "sirs,"including Zimbabwe leader Robert Mugabe, former Romanian leader Nicolae Ceausescu, and financer Allen Stanford.

"I can feel sorry for the man because he has been humiliated and been ostracized in Edinburgh, and even had a brick through his window. But he was heavily involved in the RBS fiasco so must share the blame," recycling manager Kirsty Martin says.

Many feel the punishment is well-deserved – particularly since some never supported the knighthood, awarded in 2004 for services to the banking industry – but there is also concern that Goodwin is unfairly bearing the bulk of the blame.

"I think it was the right thing to do because he was in charge when it became the biggest corporate failure in British history. The problem I have is that he wasn't the only banker who made mistakes and so it looks like he's being made a scapegoat," says teacher Chris Quinn. "I don't think people should get honors just for doing their job properly, which is what Goodwin got it for. There are plenty of others who were involved in the credit crunch. And what about the huge bonuses which are still being paid out just for doing their jobs?"

The British Bankers' Association, which represents 200 banks, declined to talk about the knighthood removal, as did Goodwin's former employers at RBS.

But politicians were happy to comment. Chancellor of the Exchequer George Osborne told Sky News, "I think we've got a special case here of the Royal Bank of Scotland symbolizing everything that went wrong in the British economy over the last decade. Fred Goodwin was in charge and I think it's appropriate that he loses his knighthood."

But not all public figures supported Goodwin's dethronement. Former chancellor and fellow Scot Alistair Darling described it as "tawdry," while ex-motor racing champion Sir Jackie Stewart said the treatment of his friend had set a "dangerous" precedent and that others associated with the collapse should be punished too, such as the Financial Services Authority watchdog that permitted the takeovers that brought down the bank.

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Whether or not Goodwin's punishment is fair, it might be just the most obvious sign that the attitude toward the financial industry is changing. Bankers used to regularly walk away with hefty bonus with little comment, but this week the current CEO at RBS, Stephen Hester, declined to take a £1 million ($1.6 million) bonus after coming under huge media and political pressure. Today Chairman Sir Philip Hampton acknowledged public resentment over executive salaries, saying banker pay had been "high for too long."

"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. We need to change the bonus culture and we need real responsibility right across the board," opposition leader Ed Miliband said.