Warning: Full spoilers for the episode below.
At this point, at the start of its third season, you kind of just have to embrace Gotham's desperate madness. It's not a great show -- hell, at times it's not even a good show -- but by the end of its first year it had already figured out what it was going to be.
And that show was not going to be a thoughtful look at Gotham's police force and criminal underworld in the decade plus before Batman arrives on the scene to clean up the streets. It was to be a madcap, go-for-broke coloring book filled to the brim with everything from Easter Eggs to full-fledged Batman-verse characters so that the series could be as close as possible to a Batman show regardless as to whether or not it made sense.