Such liquidation would entail not solely a removal of demand but an equal removal of both supply and demand for MBS. Accordingly, the implementation of portfolio limits should pose no significant difficulties: The amassing of GSE portfolio assets is a simple grossing-up of mortgage assets, which can be initiated and reversed in quite large volumes with relative ease.
In other words: building resilience into the financial system in good times may seem expensive, but over the long run it is the most cost effective thing to do. So the banking sector has withstood the Covid stress test pretty well. However, you and I know that not everything went smoothly in the financial system, as events in March last year showed.