PITY POOR MERVYN KING.
The governor of the Bank of England has come under fire from all sides. First, at the onset of this summer's credit crunch, he made himself unpopular by being less accommodating than his peers in Europe and the U.S. Then, after King agreed to provide emergency funding to the stricken Northern Rock, Britain's fifth-largest mortgage lender was,he was accused of fostering moral hazard. This assistance inadvertently sparked the first bank run in England in over a century. And most recently, King was forced into an embarrassing about-face on his previously tough stance by agreeing to extend loans to banks for longer periods against lower-quality collateral. Meanwhile, the Bank of England's loans to Northern Rock keep growing.

All this goes to show that the role of the central bank during times of panic is more difficult in practice than it might appear in theory. The notion that...