Ouch! That hurt!

Goldman: The money machine that is Goldman Sachs made $80 million before tax on an average day last year. So the bank earned more in a morning than the cost of its fine from the UK's Financial Services Authority.

Nevertheless, the fine of £17.5 million ($27 million) will hurt. The FSA’s Final Notice discloses rather too much of the inner workings of the bank which likes to present a smooth, slick face to the outside world. Goldman is guilty of cock-up, rather than conspiracy, yet to have the FSA's director of enforcement and financial crime conclude that it had defective systems and controls is a bad blow.

When the US Securities and Exchange Commission told Goldman in August 2008 that it was investigating the ill-starred Abacus 2007-AC1 $1 billion synthetic collateralised debt obligation, New York compliance treated it as a purely domestic affair.

Yet one of the principals, Fabrice Tourre, had already transferred to London, and the near-worthless paper had been sold to London clients. As the extent of the collapse in the value of Abacus' underlying assets became clear, senior London staff were called to testify to the SEC.

Even after the SEC served two notices of intent to take enforcement action, the second naming Tourre, the penny still didn't drop at Goldman in New York. London legal knew about the Abacus case, but London compliance did not, and nobody thought to tell them. Not until the SEC publicly alleged fraud over the Abacus sale did the FSA learn anything about the affair.

Goldman's damage limitation machine argues that it 'fessed up as soon as it could, that nobody lost any money from its failure to tell the FSA, and that it was a first offence. Its crime does look less than half as bad as JP Morgan's blunder in failing to separate client account monies (which produced a fine of £33.3 million earlier this year).

Yet, Goldman bankers boast of being better than the rest. It adopts a position of hurt innocence should anyone suggest it less than perfect. Now it has suffered its first drubbing at the hands of the FSA, that position will be harder to maintain.