If a mod tells someone "don't say this here", or "get the fuck out", their word is law. That's power. And that power is delegated by the other users, when they join the community, under the condition the mod will use that power to improve the collective space that everyone (not just the e-janny) is building there.

And without users, there's no community. It's only when you have a bunch of people there, sharing stuff, connecting, etc. that you can say "yup, this is a community". Same deal with an instance - without users, it's just a computer wasting power.

So it's a give and take. Both sides owe each other, as both are necessary to build the community.

There's also the matter that all human beings eventually fuck up, sometimes really bad. If that human being is a mod, acting as such, a community needs tools to tell them "you fucked up". And then decide to either keep trusting the mod or pack their things and emigrate. But for that, you need transparency - and for transparency you need to know why the mod did something.

Regarding money, instance costs should be a collective effort. That's why so many instances rely on donations.