Feds Crack Down on S&P for Defrauding Investors

And back here at home, wall street called to a count today. The federal government and 16 states declared a kind of legal war on s&p, the huge ratings agency. They are now accused of helping... See More

And back here at home, wall street called to a count today. The federal government and 16 states declared a kind of legal war on s&p, the huge ratings agency. They are now accused of helping trigger the biggest financial meltdown in recent times. And abc's senior justice correspondent pierre thomas has that story. Reporter: Rebecca hiramoto and her husband were among the millions of americans devastated when the housing market collapsed in 2008. The value of their home, their prime investment, cratered. If I think about it too much, it makes me sick. 500,000 in two years? It's like -- are you kidding me? Reporter: Today, prosecutors accused standard & poor's of lighting the fuse that helped ignite the housing market and financial meltdown. While big banks and lenders built mortgage-backed bonds, it was s&p's faulty ratings that detonated them. Reporter: For a fee, s&p rates the quality of investments, in essence, giving them a kind of good housekeeping seal of approval. The government claims that s&p kept giving top ratings to investments its own analysts warned were risky. S&p executives allegedly ignored these warnings and between 2004 and 2007 concealed facts, made false representations to investors and financial institutions. Reporter: But today, attorneys for s&p suggese government was on an unmerited witch hunt. The government is claiming there was a fraud, which didn't happen. Their predictions were made in good faith. Reporter: The government is seeking $5 billion in civil damages. But critics are wondering why this is not a criminal case, and why prosecutors are not trying to put s&p executives in jail. Pierre thomas, abc news, washington.