Finally someone talking about Excess Reserves

We've had, what, 3 explicit rounds of quantitative easing now, as well as other rounds of less advertised expansions of the monetary base since 2007 yet we've seen no real inflation. I hear a lot of people talking about the increased M1, but very few people talk about the cause of the missing inflation: Increased excess reserved held by banks most likely because the Fed is now paying interest on reserves. Carpe Diem has a great graph:

Finally there is some discussion of this factor, according to Carpe Diem the NY Fed has a paper out titled "Why Are Banks Holding So Many Excess Reserves?"

From their conclusion:

Paying interest
on reserves allows a central bank to maintain its influence over market interest rates independent
of the quantity of reserves created by its liquidity facilities. The central bank can then let the size
of these facilities be determined by conditions in the financial sector, while setting its target for
the short-term interest rate based on macroeconomic conditions. This ability to separate
monetary policy from the quantity of bank reserves is particularly important during the recovery
from a financial crisis. If inflationary pressures begin to appear while the liquidity facilities are
still in use, the central bank can use its interest-on-reserves policy to raise interest rates without
necessarily removing all of the reserves created by the facilities.

This sounds to me like the rounds of quantitative easing, then, were not so much aimed at stimulating economic output, but were instead intended to shore up banks. You increase liquidity, and you increase bank revenue streams without significantly impacting anything outside of the banking sector... Sounds pretty similar to TARP but with less obvious numbers.

I haven't had a chance to read the paper yet, but I'm curious to see how far off the mark I am. And if this doesn't make for a subsidy to banks, what was the point of increasing the currency base without increasing the interest rate or price level?