Dudley missed a few points

The Fed Should Keep Looking Forward, Not Retreat to the Past

First, the Fed does not have a balance sheet, all those Treasuries are borrowings by Treasury. The borrowings are done via the Fed but are borrowings none the less.

Second, Treasury  relies on the primary dealer system to determine quantities, so the Fed is out of that loop.

Third the fed is a variable tax collector with the seigniorage stream. Collecting taxes by the Fed causes a cycle.

Fourth, the Fed is faking it on interest setting, it always follows the one year treasury rate, as shown below:

One can see the target rate always closely follows the one year.

Basically the Fed and the primary dealers have one function, keep Treasury liquid.