Yves Smith has a great post about the banks playing chicken with central banks. This will be of interest to my UK readers, since it discusses the Northern Rock situation.

In a game of chicken, the loser is the player who swerves first out of the way of the other driver’s car. Since the Bank is concerned about the health of the economy, while the banks are concerned only about their survival, the former is at a huge disadvantage. Apparently, the banks told the authorities they would not lend to their weaker brethren until the Bank opened its wallet. The threat was credible and the Bank swerved.

I think she nailed it. The Central Banks need to show more nerve, otherwise the taxpayers will continue to suffer.