Say what you will, but you can’t say the Department of Justice isn’t going after the institutions responsible for perpetuating and deepening the housing crisis. First it went after the big banks (which recently settled for$ 8.5 billion), and now Standard & Poor’s (marking the first such case against a credit rating agency):

“The Justice Department plans to file civil fraud charges 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 Justice Department has decided to sue S & P for $5 billion. S & P contends it did no wrongdoing leading up to the housing crisis. The company will point to the facts that the Fed didn’t even know the severity of the housing bubble just days before it popped, and that its ratings were similar to those of other agencies.

“The case is said to focus on about 30 collateralized debt obligations, or C.D.O.’s, an exotic type of security made up of bundles of mortgage bonds, which in turn were composed of individual home loans. According to S.& P., the mortgage securities were created in 2007, at the height of the housing boom. S.& P. was paid fees of about $13 million for rating them.

Prosecutors, according to the people briefed on the discussions, have uncovered troves of e-mails written by S.& P. employees, which the government considers damaging. Portions of those e-mails are likely to be disclosed in the government’s complaint, these people said. The firm gave the government more than 20 million pages of e-mails as part of its investigation, the people with knowledge of the process said.”

Here’s the role the DoJ will argue S&P played in perpetuating the housing bubble:

“The three major ratings agencies are typically paid by the issuers of the securities they rate — in this case, the banks that had packaged the mortgage-backed securities and wanted to market them. The investors who would buy the securities were not involved in the process but depended on the rating agencies’ assessments.”

The three major ratings agencies are S&P, Moody’s, and Fitch; at this point the suit is only set to be filed against S & P, although subsequent cases could implicate the other two agencies, especially if the DoJ is successful in proving wrongdoing between S & P and the financial institutions it rates.

Paul Krugman weighs in on why financial reform is still important: Financial reform and holding financial institutions responsible for past violations are not the same thing. But viewed together, they both represent taking America back from corporate interests and making the country work for the average U.S. citizen. It represents a Wall St. vs. Main St. fight that has been long overdue.

“How can the G.O.P. be so determined to make America safe for financial fraud, with the 2008 crisis still so fresh in our memory?…Right now, all the media focus is on the obvious hot issues — immigration, guns, the sequester, and so on. But let’s try not to let this one fall through the cracks: just four years after runaway bankers brought the world economy to its knees, Senate Republicans are using every means at their disposal, violating all the usual norms of politics in the process, in an attempt to give the bankers a chance to do it all over again.”

The Obama administration and the Justice Department seem to be thinking along the same lines as PK. Some may argue that more resources should be focused on holding responsible those individuals who were central in perpetuating the housing bubble. The issue with this goal is who to go after? Should it be the CEOs [who still received huge bonuses and salaries despite taxpayer bailouts]? Should it be the financial engineers who created derivatives that were too complex for most people to understand, or perhaps the bankers who made large commissions by knowingly selling mortgages to people who could not afford them?

By focusing on the organizations as a whole, and pursuing a civil case instead of a criminal case, the DoJ is giving itself the best opportunity to win the case. Sometimes we have to look past the narrow definition of what we feel would be “right” and instead focus on what is most feasible.  In these cases, a significant portion of the money won is supposed to go directly towards helping those whom were taken advantage of and lost their homes due to delinquent practices by financial institutions (who tend to be the poorest people who were seen as easy targets).    If the DoJ can prove wrongdoing by S & P and win this case, you can be sure that Moody’s and Fitch will be the next rating agencies in the hot seat.  Every dollar won back to help those who lost their homes due to illegitimate business practices by financial institutions is a dollar worth fighting for.