> There is no incentive for them to stop granting bad patents.

I disagree.

a: If they are currently overrun with more work than they can handle, they can remedy this by refusing patents, thereby discouraging frivolous applications. Having done so, they can become a more efficient organisation.

b: Fees for continuations, amendments and extending response deadlines can be larger than the fee for simply issuing the patent.

c: As a Government entity, they have an interest in making as much money as possible change hands (and therefore attract tax). One way to do this is to occupy the applicants' lawyers with remedial work.