What happens if the Fed quits paying interest on excess reserves?

First, see this article from Forbes predicting that the Fed will quit paying interest on excess reserves:

recent economic data--including the Philly Fed Index, first-time jobless claims and retail sales--are already pointing to a probable double-dip recession. Therefore, the Fed’s next move is more likely an easing than a tightening of rates.
...
The Fed’s likely ease will involve zero interest on excess reserves: Since October 2008 the Fed has been paying interest on commercial bank deposits held at the central bank. But because of Bernanke’s fears of deflation, he will do whatever it takes to increase the money supply. With rates being near zero and the Fed’s balance sheet already at an intractable level, the only viable solution to fight Ben’s phantom deflation fear is for him to remove the impetus on the part of banks to keep their excess reserves laying fallow at the Fed.

If commercial banks stop being paid to keep their money dormant, they will find a way to get money out the door. They may even start shoving loans out through the drive-up window. Banks need to make money on their deposits (liabilities). If they don’t get paid by the Fed, they will be forced to take a chance on the consumer. After all, it has been made clear to them that the Fed and Treasury stand ready to bail out banks’ bad assets at any cost. So why not take a chance once again?
--http://www.forbes.com/2010/06/22/bernanke-fomc-deflation-personal-finance-inflation-depression.html

Next, read an opinion on what will happen if banks start lending out those excess reserves:

The threat to the money supply occurs if banks decide they are comfortable with deploying those excess reserves or lending them out. If this were to happen, it would not increase the money supply by $855 billion; rather it would increase the money supply by some multiple of that. Historically this multiple is conservatively around 7x, which implies a potential increase in the money supply of approximately $6 trillion.
--http://www.scribd.com/doc/20660727/Hayman-October-Letter

Comment: I'm not sure what the author means by "money supply". The money multiplier for M1 has been about 1.6x, until Sept. 2008 when it fell off the cliff and dropped below zero. If all the excess reserves were lent out, they would increase M1 by $1,368B if the ratio returns to 1.6. The current level of M1 is now at $1,700B, so it would suddenly increase by 80%. Even if M1 didn't increase quite this much, it could lead to high inflation almost overnight. This could lead to interest rates rising at least slightly in order to compensate. This in turn could start to burst the government bond bubble, since bond prices are inverse to interest rates, making bonds harder to sell and requiring higher rates, reinforcing the trend. The higher inflation and interest rates would cause the budget deficit to swell even more and ruin the CBO's projections. So this act of reducing interest rates on excess reserves to zero could be similar to striking a match in a forest full of dead trees.