Reddit can't actually replace all of the mods. They're bluffing. I'm not saying its impossible given infinite time, but on the timelines they need it is impossible. Imagine trying to replace even 200 top subs worth of mods. If you just take anyone who volunteers you're going to have months or years of having to intervene and replace the ones that go on power trips. Trying to vet them extensively would also be a pain and take far too long. And then there's trying to familiarize the new teams with the customized mod tools of a team which was just all fired...
They can't do it without making the shitshow even worse. Bad for their IPO. The mods backing down right now are idiots.
I don't think charging for the API is inherently wrong, but they want to charge a ridiculous amount. It should be 1/4th of what it is, or less. The Apollo guy calculated it is 20x more than what the average user makes them, via Reddit's own previously posted user monetization stats.