The decision to strip Fred Goodwin of his knighthood was described as "tawdry" and a "distraction" by Alistair Darling and Alex Salmond, as the business community attacked Tuesday's move.
The Cabinet Office said on Tuesday the disgraced ex-RBS chief's honour for services to banking "could not be sustained."
The decision of the independent forfeiture committee, while immediately welcomed by the prime minister and Ed Miliband.
But Scottish First Minister Alex Salmond said: "I suppose I'm not the only person to whiff some humbug in this whole business for two reasons.
"What about all the other people who are keeping their honours who were also involved in the financial collapse? Are they going to have their honours withdrawn?
"What about the folk in the House of Lords who have been convicted of serious criminal offences? Why are they still in a legislature?
Simon Walker, director general of the business group the Institute of Directors said he was worried about "anti-business hysteria".
"I am concerned about an anti-business hysteria about the whole situation. There is a well established procedure if people are convicted of criminal offence they are stripped of their honours. "
Former CBI head Lord Digby Jones said the affair had "the faint whiff of the lynch mob on the village green."
This morning former chancellor Alistair Darling argued that the decision was "tawdry". He pointed out that Goodwin had not committed a crime, unlike others who had been stripped of their honours.
"We need to know the principles. What are the things they are going to be held to account for? There were other knights of the realm involved in this business. Are we going after them?," he asked.
Darling, who was in power at the time of the banking crash, said the system was in consistent, and there were some in the House of Lords who had been jailed but were still able to vote: "If you take RBS, they were chaired by knights of the realm." he told BBC Radio 4's Today programme.
Tory MP Mark Field told Sky News the country was going down a "very dangerous path": "He turned out to be monumentally incompetent rather than the King of the Universe that he would have had us believed back in 2004. But I'm kind of uneasy that essentially, are we saying that any big businessman who gets an award for industry, and then his business collapses some years later is then going to be subject to having his knighthood taken away?"
Conservative party co-chairperson Michael Fallon said Goodwin had been the "dominant decision maker" in the "downfall" of the Royal Bank of Scotland. "This decision hasn't been done on a whim.. [it] follows a detailed response by the FSA."
Goodwin's close friend, the racing driver Sir Jackie Stewart said he believed the former banker would be "disappointed" and "sad" to lose his knighthood, a move which Stewart warned could set a "dangerous precedent".
John Mann, a Labour MP accused politicians of hypocrisy: "Senior politicians will now say, 'we can move on, we got the guilty man'. It wasn't one guilty man. There were many more bankers and the culture of banking was so that there were huge numbers of people taking excessive risks. If we are going to reward those who gambled and succeeded, but punish those who gambled and lost, we are supporting the whole system of reckless banking."