Another excuse for lawyers to drive up their pay negotiating contracts.
For the record though, Amazon is no angel in this situation. They are trying to weasel their original contracts instead of negotiating new contracts for these types of transactions. Also, while they call their service a library, it is NOT the same as the public library system. Amazon is not offering a fully free library as a public service in the pursuit of knowledge, they are using their "library" as a marketing tool to sell Kindles. It is still a private service of the company for Prime members. It isn't comparable to the public library system.
Now, it seems like Amazon would get the worst of this because they have to buy a book to loan one, so I feel like there's something we're missing from this story. They could just set down a new contract that allows for loans, so why not just do it? I'm not on the publishers side either though, they're probably refusing to go along with it because they want to make more money. Once books start getting lent with a great deal more convenience than a public library, people might stop wanting to pay for them. The average person isn't going to read a book more than once, unless it's reference material. Loaning is a dangerous idea for authors.