“The Justice Department filed civil fraud charges late on Monday against the nation’s largest credit-ratings agency, Standard & Poor’s, accusing the firm of inflating the ratings of mortgage investments and setting them up for a crash when the financial crisis struck.

“The suit, filed in federal court in Los Angeles, is the first significant federal action against the ratings industry, which during the boom years reaped record profits as it bestowed gilt-edged ratings on complex bundles of home loans that quickly went sour. The high ratings made many investments appear safer than they actually were, and are now seen as having contributed to a crisis that brought the financial system and the broader economy to its knees.

“More than a dozen state prosecutors are expected to join the federal suit, and the New York attorney general is preparing a separate action. The Securities and Exchange Commission has also been investigating possible wrongdoing at S.& P.”

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Read Andrew Ross Sorkin and Mary Williams Walsh’s full New York Times article here