Yield Burning

Burn, baby, burn!

Like most, um...burnings, yield burning is a big no-no legally. Yield burning is when underwriters (the ones who write up legal docs for loans, bonds, and other debt instruments) mark up the prices on bonds to make the yield on the bond smaller, reducing the taxes on it.

tl;dr: it’s a form of tax fraud. The SEC and IRS no likey.

The proof is history. Michael Lissack, a.k.a. the yield burning whistleblower of Wall Street, told the government that over 20 Wall Street banks sold bonds to government agencies at a higher-than-fair price, keeping the extra (and the taxes) for themselves. They got in biiiiig trouble. And Lissak got biiiig money. Booyah.