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 The government said in a civil complaint filed late Monday that S&P misled investors by stating that its ratings were objective and "uninfluenced by any conflicts of interest." It said S&P's desire to make money and gain market share caused S&P to ignore the risks posed by the investments between September 2004 and October 2007.
The charges mark the first enforcement action the government has taken against a major rating agency involving the worst financial crisis since the Great Depression.
According to the government filing in U.S. District Court in Los Angeles, the alleged fraud made it possible to sell the investments to banks. The government charged S&P under a law aimed at making sure banks invest safely.
S&P, a unit of New York-based McGraw-Hill Cos., has denied wrongdoing and said that any lawsuit would be without merit.
If S&P is eventually found to have committed civil violations, it could face fines and limits on how it does business. The government said in its filing that it's seeking financial penalties.
The action does not involve any criminal allegations. Critics have long complained about the government's failure to bring criminal charges against any major Wall Street players involved in the financial crisis.
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 Criminal charges would require a higher burden of proof and carry the threat of jail time.
McGraw-Hill shares rose 11 cents to $50.41 in Tuesday's premarket session, after plunging nearly 14 percent the day before on the expectation that a lawsuit would be filed.
Shares of Moody's Corp., the parent of Moody's Investors Service, another rating agency, rose 53 cents to $49.98 before Tuesday's opening bell, after closing down nearly 11 percent on Monday.
[Associated
Press; By DANIEL WAGNER]
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