Such competition would bring about better ways of analyzing securities and would allow more open information about their makeup, especially the real worth of the securities' collateral.
Once a municipal bond is refinanced, (prerefunded) the issuer uses the proceeds of the new issue and purchases US Treasury securities(collateral) that are used to pay the interest and principal on the original, more expensive debt until maturity or the call date, whichever the escrow agreement states.
Investment banks have already rushed to reduce their reliance on overnight funding in repo markets, after lenders lost faith in the securities used as collateral.