You need to extend your metaphor.

Imagine instead that the government was paying car manufacturers more than the cost of installation for every seat belt in a car.

You wouldn’t need to have a policy requiring seatbelts: every car would be liberally festooned with them.

But it costs the taxpayer money that way via the interest payments, whereas one more regulation doesn't.

Honestly, if you don't understand the difference between the Treasury and the Federal Reserve (as this comment suggests), I'm sorry to say that you're not going to find this conversation very enlightening.

You must not know that the Federal Reserve returns income to the Treasury.