Rating the Ratings: How Rating Agencies Dismiss Kantian Ethics
Last week in the Wall Street Journal, there was an article about how bonds of Exxon Mobil and Johnson and Johnson are trading with yields below those of comparable Treasurys. This is an indication that investors believe these Exxon and J&J bonds are safer than US Treasurys. The article indicated that if this trend continues, the country could face its second credit-rating downgrade following Standard & Poor’s cut below triple-A last year (McGee). After reading this article, I began questioning how credit rating agencies evaluate credit scores. How ethical and reasonable is this process? I understand that value of having a letter rating to give investors’ confidence in what securities they are about to involve themselves with, but how does one define that security of debt by a simple letter? I will research the history and background of credit-rating agencies and identify the ethical reasoning of these scores with Kant’s deontological theory.
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