S&P competed with Fitch and Moody's for the business of the banks and brokerages that were packaging the mortgage-backed bonds. In some cases, critics say, rating-agency analysts were pressured to give unrealistically high ratings to curry favor with Wall Street.
Q: How did the government make its case?
A: The complaint, filed late Monday in federal court in Los Angeles, includes a trove of emails and other documents aimed at proving that S&P knew the housing market was melting down long before it changed its ratings.
In March 2007, for example, one analyst wrote an ode to the subprime mortgage meltdown, emailing colleagues with a takeoff on the song "Burning Down the House" by The Talking Heads.
"Watch out/Housing market went softer/Cooling down/Strong market is now much weaker/Subprime is boi-ling o-ver/Bringing down the house," he wrote. A few days later, the analyst sent a video of himself singing and dancing that verse in S&P offices, with colleagues laughing.
Yet S&P kept rating subprime-backed investments as safe, the government says.
Q: So who's going to jail?
A: No one. The charges are civil, so the harshest penalties would be fines and limits on how the company does business.
In general law enforcement officials have had a tough time making criminal cases against high-profile people involved in the 2008 financial crisis. Justice Department officials have argued that they simply don't have the evidence to prosecute criminal cases, which would carry a higher burden of proof than civil charges.
So most of the cases related to the crisis have been actions by regulators or lawsuits against small-time mortgage industry workers who committed on-the-ground fraud. No major Wall Street executive has faced the threat of jail time in relation to the crisis.
Q: Have lawmakers fixed the credit rating system?
A: There have been some reforms, but critics say they don't go far enough.
Under the 2010 overhaul of financial rules known as the Dodd-Frank Act, the Securities and Exchange Commission gained stronger powers to oversee rating agencies. Safeguards were put in place to prevent banks from shopping around for the best rating.
Some proposals went farther. One would have randomly assigned a rating agency to each investment. It did not make the final bill.
Daniel Wagner can be reached at www.twitter.com/wagnerreports .