On March 3, 1995, the front page of the New York Times business section carried a story headlined “Accuser in the Municipal Bond Industry.” The story began: “In 14 years at Smith Barney, Michael R. Lissack earned millions of dollars. He advised local governments on bond issues worth tens of billions. And, he contends, he helped Wall Street line its pockets at the expense of taxpayers.”
The story detailed what whistle-blower Lissack described as “yield burning,” an almost inexplicably obscure process that might best be boiled down as the systematic overcharging banks and securities firms engaged in while putting together open-market Treasury escrow accounts for state and local municipal bond issuers. By marking up the prices on ...