Stressed Banks Underreporting Libor Rates

The Wall Street Journal reports on another sign of how bad the credit crunch has gotten: banks fudging on what they are reporting as their short-term cost of interbank borrowing, out of fear of revealing how stressed they are. So the Libor becomes less useful as a guide. That in turn means that the so-called TED spread (the difference between three month Libora and ninety-day Treasuries), which...