I think it's both: (and probably much more that is not as obvious)

The government told the banks--here are your new lending guidelines, if you don't follow them you are open to penalties/lawsuits.

The Banks said we've got to get this bad shite the gov't forced us to take on off of our books.
The ratings companies saw all their new issuances starting to suck, but had to still try to rate them so that their clients could move 'em and not falter so the entire ratings system was corrupted.

Taking advantage of the situation, a bunch of mortgage executives form a company and sweet talk someone into giving them a monster line of credit. They establish relationships with Wall Street firms to buy their paper. They then set up operations centers and hire staff and begin to originate subprime and Alt A loans. They don't have to meet capital requirements for banks. They arent' covered by CRA for the most part. they take their subprimes, bundle them, sell in bulk to wall street or Citi or RFC/GMAC, and make a killing.

But bad loans are still bad loans and foreclosures began rolling, the housing market tanked and there was no bad loans to keep the illusion going so the companies holding the CDOs began losing just enough capital to tip them torwards insolvency (thinly capitalized i guess).

Now the gov't is stepping in as a hero to save the industry with its ability to pull money out of its arse, when it was the worm in the foundation to begin with.

The end result is that the necessary deflation of the housing market is cut short, the decrease in the money supply is stalled, and thousands of jobs are saved, but the root cause of the problem is not addressed.

So everyone is crucifying ratings agencies, banks, etc., when they really just reacted to the governments interference in the market.

Now, it is spilling over to other industries as well.