January 31, 2012
A Different Kind Of Sanction
Posted by David Zaring

In the midst of repeated appeals to the merits of jail time as a post-financial crisis government strategy comes word of a new kind of reckoning.  The CEO of the Royal Bank of Scotland, who disastrously pushed his bank to go really big in the runup to the financial crisis, and received a knighthood for his efforts, is now getting stripped of it:

The British government announced Tuesday that Frederick A. Goodwin, the former chief executive of the Royal Bank of Scotland, now nationalized, would be stripped of his knighthood.

A couple of weeks ago, the country’s prime minister,David Cameron, said that he supported a review of Mr. Goodwin’s knighthood, which Mr. Goodwin received in 2004 for his service to the British banking industry.

That honor now looks woefully out of place. The bank, based in Edinburgh, is 82 percent owned by British taxpayers after receiving a multibillion-dollar bailout in 2008. Mr. Goodwin, who gained the nickname Fred the Shred for his cost-saving efforts, left the bank after the government took control of it in 2008.

Perhaps most amusingly, the stripping puts Mr. Goodwin among some pretty select company.

The removal of his knighthood places Mr. Goodwin alongside other notable individuals. Robert G. Mugabe, the president of Zimbabwe, lost his honorary knighthood in 2008 because of violence ahead of a presidential runoff. Jean Else, who helped transform a failing British school, lost her damehood last year for ignoring some standards and promoting her twin sister.

Given the track record of previous financial crises, I expected a lot more jail time in exchange for the bailouts, but perhaps the bailouts put governments in a "doing business with" rather than "being really angry at" place vis a vis the large banks.  From an American perspective, that relationship would be different from the one that developed after the S&L crisis of the 1990s.  But perhaps Britain is showing the way with regard to imposing sanctions, but not resorting to the criminal code.  If only the United States permitted titles.

Administrative Law, Financial Crisis, Financial Institutions | Bookmark

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