Regulation: UK's FSA to investigate Goldman Sachs

It's several years since the UK's FSA teamed up with the Financial Services Agency in Japan to tag-team Credit Suisse over its conduct in Japan and since then cross-border regulatory co-operation has become more commonplace.

But the reasons behind the UK regulator's announcement that "Following preliminary investigations the FSA has decided to commence a formal enforcement investigation into Goldman Sachs International in relation to recent SEC allegations" is more complex than first appears.

First, the FSA is nominally independent but ever since its formation, it has danced to Gordon Brown's tune, first as its primary architect and Chancellor of the Exchequer and subsequently as prime minister. Brown's control-freakery is greater even than his predecessors in relation to the fiefdom he considers his own - and that's anything that could possibly fall under the umbrella of Treasury.

Brown is in a fight for political survival: an election is looming and he has shot every bolt he has to shoot in his attempt to prove himself a credible leader. All he has left is Fear Uncertainty and Doubt. And cheap shots: he is making it his campaign point to continue his crusade against banks. And as soon as he heard that the USA's SEC was instigating civil proceedings against Goldman Sachs, Brown jumped on that announcement to say that the UK would conduct its own investigation.

The problem was that Brown has no department which can do that. The police are very unlikely to be interested, as is the Serious Fraud Office. The Blair-Brown creation of Department of Business, Industry and Skills - formerly the Department of Trade and Industry - is similarly unlikely to be excited by the prospect. Both fall under someone else's purview.

It is impossible to imagine that the FSA's announcement yesterday is a co-incidence. And, as has happened repeatedly, especially during the financial crisis, Brown's hand in the announcement is clearly visible to those who care to look.

The underlying reason being given is that the SEC has issued proceedings against the bank but also against a senior officer : Fabrice Tourre. Tourre, formerly in New York now works for Goldman in London where he is an approved person, authorised by the FSA.

That's actually a good reason: the question for the FSA is whether that authorisation is appropriate.

It is rumoured that, because of the surprising 91% improvement in turnover and a substantial improvement in profit at Goldmans in the past year, Tourre is in line for a large bonus.

So Tourre is exactly what Brown needs: an allegedly fraudulent banker benefiting from his conduct - and right under his nose in London.

The FSA is undoubtedly right to look at Tourre: the integrity of markets depends on the quality of authorisation. But it is difficult to see why Tourre should be singled out for this treatment - similar allegations could be levelled at thousands of others involved in the whole sub-prime/cdo scandal including so-called ratings-agencies.

And some of those others are also in the UK.