Rating downgrades of bond insurers as a result of the subprime mortgage crisis have "effectively destroyed" the image of a triple-A rating, John Peterson, a professor of public policy at George Mason University, warned at a National League of Cities' conference.

Peterson also said the municipal market, "where the bond insurers made their fortune and got their fame, was an innocent bystander," and that he believes the nation is already in a recession due to the subprime mess and its resulting impacts.

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