Ever since the financial breakdown hit in 2008, there has been public outcry over the fact that no one from Wall Street has had legal charges brought against them for their involvement in the crisis. That all changed today when the Security and Exchange Commission filed charges against Goldman Sachs, alleging that the firm engaged in fraud while marketing subprime mortgage products. The announcement to file suit comes as national lawmakers are beginning to has out the details of a seemingly imminent financial reform bill.

The SEC claims that Goldman Sachs marketed ABACUS, a collateralized debt obligation (which we will explain more thoroughly later), using dubious and illegal tactics. Also implicated is John Paulson of the investment firm Paulson & Co, who made billions of dollars betting against the housing market. According to the SEC, Goldman concealed several facts about ABACUS while promoting it to potential investors, particularly the fact that Paulson & Co was choosing investments for the portfolio. In addition, the SEC also claims that Paulson himself bet against the CDO, putting him in a position to benefit financially when the housing market failed.

In order to understand the case fully, it is important to have at least a basic understanding of what a collateralized debt obligation is. In essence, a CDO is a financial instrument that allows investors to put money into a pool that is backed by some sort of bonds, loans or other asset. The purpose of a CDO is to transfer risk and hedge against the potential risk of investments. Traditionally, CDOs haven’t been backed by mortgages—that is, up until the rampant lending in the early 2000s necessitated and perpetuated a system that needed investors to by mortgages. So when the term is used in reference to the current financial crisis, the CDOs are generally backed by mortgage-backed securities. All of these financial instruments fall under the blanket of derivatives, as their value and returns are based on other assets and agreements.

In the case against Goldman and Paulson, the SEC is alleging that the two entities sold CDOs to customers knowing their inherent risk and then bet against them to increase returns and profit themselves. According to the SEC, Goldman created ABACUS, and assumedly other similar derivatives, for the sole purpose of failing and providing them a way to recoup money that they had previously invested in the real estate market. If the allegations are true, it is strong evidence supporting the claims of many that the “fat cats” on Wall Street are willing to skin their clients to save their own bacon.

The suit may seem like a momentous step in sorting out the crisis and assigning blame, there is a general consensus that little will come from it. Goldman’s stock plummeted today, but experts agree that there will likely be few if any changes to their long-term structuring or investment practices.

“The greatest penalty for Goldman is not the financial damages — Goldman is enormously wealthy — but the reputational damage,” said John Coffee, a securities law professor at Columbia Law School.

It doesn’t seem like a coincidence that the lawsuit comes at a time when the Obama administration and Congress are looking to forge a bill on financial regulation. Even if there are no legal ramifications for Goldman, the story has certainly brought attention to the fact that there was—at the very least—questionable activity in the unregulated derivatives market. In a statement on Friday, President Obama declared that he would veto any financial overhaul bill that didn’t include specifications for derivative oversight.

In order to push a financial reform bill through the Senate, the Democrats will need to persuade at least one Republican to their side to achieve a supermajority of 60. That shouldn’t be too difficult, however, as financial reform seems to be one of the few topics that the two parties can find some common ground on.

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