Benefits of understated spreads?

By Fester:

Paul Krugman is passing along a link from the Wall Street Journal about the TED spreads as a measure of systemic fiscal fear of risk.  The higher the TED spread, the higher the perception of liquidity and counterparty risk.  And right now, even after significant coordinated Central Bank interventions and facility building, the TED spread is on its way back up again.  However the Wall Street Journal is concered about information transparency as they are hearing reports that the interbank rate [LIBOR] (the first number in the TED spread) is being reported at an artificially low number for some trades. 

In a development that has implications for borrowers everywhere, from Russian oil producers to homeowners in Detroit, bankers and traders are expressing concerns that the London inter-bank offered rate, known as Libor, is becoming unreliable....

Libor provides a key indicator of their health, rising when banks are in trouble. Its influence extends far beyond banking: The interest rates on trillions of dollars in corporate debt, home mortgages and financial contracts reset according to Libor.....

The concern: Some banks don't want to report the high rates they're paying for short-term loans because they don't want to tip off the market that they're desperate for cash. The Libor system depends on banks to tell the truth about their borrowing rates. Fibbing by banks could mean that millions of borrowers around the world are paying artificially low rates on their loans. That's good for borrowers, but could be very bad for the banks and other financial institutions that lend to them

Good, reliable and trustworthy information is critical to making consistently good decisions as evaluated from a process perspective.  Good information into an effective decision and analysis system will lead to a higher probability of good outcomes.  Intentionally feeding garbage into a decision loop is an excellent way to create bad outcomes. 

So who besides bankers who are fearing a run on their balance sheets and cash reserves benefit from this action?  The rest is pure speculation on my part.

Borrowers in the short term with adjustable rate debt benefit as the LIBOR index would be artificially low.  Borrowers would be getting an interest rate break for the time being.  However this advantage is short term and non-systemic.  If lenders begin to not trust the LIBOR numbers, they will move their rate indexes to other indexes or raise the allowable spreads in order to compensate for what is perceived to be the 'real LIBOR' rate. 

However those types of interest rate and interest spread adjustments will quickly fail as the garbage in the information loop drives out good data and good money.  What was once a decision to offer a loan on a set of mutually agreeable conditions that were shaped by quantifiable risk is moving towards guesstimates and ass covering as uncertainty takes over.  Risk is defined as known probabilitiese of a loss.  A higher interest rate can be calculated to assure a reasonable expectation of profit for a given risk.  However uncertainty is unknowable and therefore uncalculable.  When uncertainty dominates a system, the rational, profit seeking response is to get the hell out of that arena. 

So who benefits from injecting the potential for mass uncertainty into a fundamental credit market?  Is this something systemic or massive ass covering and fear?