I think I can address that.

Let's say that rates will go up at some point in the future. That's still a fair assumption at this point.

If the Fed doesn't shrink their balance sheet and fast before rates go up, I've seen a computation (that I have not had time to duplicate for myself, so please don't hold me accountable for merely repeating this) the Fed could lose 6% on the value of their Treasury holdings for every 100 basis points (ie, 1.0%) increase in the short-term rates.  It would not take too long before the Fed's effectively bankrupt.

Then what? If the Fed allows the market to raise rates while they're still holding over $2T in Treasury/RMBS/crap paper,  they're quickly going to call into question their own credibility Raise rates far enough and we truly have a "W...T...F...?" moment, where we're all wondering "OK Bennie... what now?"

They've jacked up their balance sheet so far, so fast, with the market priced for non-inflation out a long, long ways... that bond traders/investors are all looking at the Fed and saying "You're not going to hold this paper so long you lose money... are you? Are you? C'mon, look me in the eye Bennie... and give me a sign you have a clue?!"

I mean, this assumption is so fundamental, that it is on par with the idea that you don't look down the barrel of a loaded pistol while playing with the trigger if all you want to know is how the gun works.

When I heard his responses to the press (and I should make it clear - I misspoke, he wasn't in a hearing, he was in a newly mandated press conference), my jaw dropped. He's the head of the Federal Reserve, arguably the best-informed economist in the world, with a staff of PhD-level economists toiling away in the bowels of the Federal Reserve system... and he doesn't know why the economy isn't recovering? He has to be kidding me. He has't at least given a couple of bright kids the work detail of "Go research this and get me something profound to say during these stupid press conferences that are now mandated... because the question will come up..."

The reaction of the equity markets was rather swift, as a whole lot of guys saw his BS come across their Bloomie terminals.

This is a level of stupidity I've not seen since the "sub-prime will be contained" comments five or so years ago.