If it was a good product, Google should restaff the project. If it was not a good product, Google should seriously rethink the autonomy it gives staff to decide to launch new products.
It would be bad if they used this strategy for every employee, but for certain employees, notably, those who are likely to go found their own startups, it can be a great idea. Google gets the potential to finance a "startup" for a fraction of the hypothetical acquisition costs, and the downside is paying the salary of a few dead weights if the produce never takes off.
But when Google decides to put their main brand behind something, announce it to the world, start collecting signups, only to shut it down, that ends up continuing to burn the company's reputation. In this case, it also represented a significant partnership with a major bank, which may have burned some bridges along the way.
And bear in mind, in this case, it sounds like this VP had 3,700 employees under him... hardly a trivial cost of all the wasted effort.