Add this to the list of enforcement woes plaguing top Wall Street firms: the Justice Department is apparently making headway in its criminal investigation of banks for bid-rigging in the guaranteed income contract market, a practice that bilked municipalities out of interest income and the IRS out of tax revenue, according to Bloomberg.

The list of banks being probed include Bank of America (NYSE: BAC), Citigroup (NYSE: C), JPMorgan (NYSE: JPM), Lehman Brothers Holdings (Lehman Brothers news), Wachovia and 11 others. This probe stands now as a potential watershed muni finance investigation.

In the GIC market, banks are supposed to bid on how much interest they'll pay. But there have long been whispers about impropriety. The basic issue is whether they conspired to keep rates low. At least one murky advisory firm that allegedly took kickbacks to arrange deals has been indicted.

Meanwhile, a mystery witness has emerged. All that is known is that he is a banker who once worked for Bank of America, but he is thought to have been very involved in the market. Bank of America, in exchange for amnesty, has also been cooperating, providing evidence since at least 2007, Bloomberg reports.

It's unclear how soon we'll see indictments. But this could be very serious. People might go to jail over this. 

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