I do not lend things that I ever care to see again unless I know the person very well and have a reasonable trust in their responsibility. I would loan my Mother or one of my SIL's a crock-pot or other holiday supplies in a moment. I would not, however, loan those same items to my MIL, other SILs, or neighbors.
I agree with the others that Kara should not give an explanation and should offer only a recommendation, if she has one, on where to find baby clothes.
It's really too bad that people cannot understand why they are not entitled to another's belongings--whether it be for a baby, yard tools, etc.