“Libor Fog” is the apt warning above the headline of today’s front-page Wall Street Journal piece by Carrick Mollenkamp, “Bankers Cast Doubt on Key Rate Amid Crisis.” The article is about the interest rate on loans between banks—the London Interbank Offered Rate (Libor). “A small increase in Libor can make a big difference for borrowers,” says the author. For example, “A risky ‘subprime’ mortgage loan might carry an interest rate of Libor plus more than six percentage points.”

An accompanying graph shows the spread between the 3-month Libor and the 3-month Treasury bill rate. The article explains that “the gap between the two stood at 1.58 percentage points Tuesday, and has averaged 1.39 percentage points since the crisis began in August.”

Anyone reading this article surely thought Libor had increased “since the crisis began in August.” Why else would the graph be titled “Costly Credit”? Why else would the article have emphasized the way an increase in Libor affects subprime adjustable rate mortgages?

“On Tuesday [April 15],” the article says, ‘the Libor rate for three-month dollar loans stood at 2.716%.” In July 2007– before “the crisis began in August”–that Libor rate was 5.360%.

The reason the spread between Libor and Treasury bills widened is not that Libor rates have increased but that 3-month T-bill rates fell from 4.95% last July to about 1.2% lately, thanks to Fed easing and a flight to quality. That drop of 3.75 percentage points in T-bill rates since last July was even greater than the 2.65 percentage point drop in Libor, so the spread between the two widened. So what??? You and I can’t borrow at the T-bill rate either.

Like other factually misleading news reports, cutting the Libor rate in half (“since the crisis began in August”) is not what most people think of as a “credit crisis.”