Are Wall Street mega-banks so powerful and sprawling that they threaten our entire capitalist system? That's the claim being made by one top Federal Reserve official.

In a speech at New York University Monday (pdf), Thomas Hoenig, the president of the Kansas City Fed, argued that the biggest and most complex banks are "fundamentally inconsistent with capitalism." His remarks came just two days after global banking regulators agreed to require big banks to hold onto extra capital in order to reduce the risk of bank failures like those that occurred during the financial crisis of 2008.

"So long as the concept of a [systemically important financial institution, or SIFI] exists, and there are institutions so powerful and considered so important that they require special support and different rules," declared Hoenig, who is known as a hawk on monetary policy, "the future of capitalism is at risk and our market economy is in peril."

That's because, he argued, the existence of banks that are understood to be "too big to fail" distorts the functioning of the free market. "For capitalism to work, businesses, including financial firms, must be allowed, or compelled, to compete freely and openly and must be held accountable for their failures," Hoenig said. "Only under these conditions do markets objectively allocate credit to those businesses that provide the highest value."

The financial reform legislation passed by Congress almost a year ago was intended to ensure that banks could never again grow so large that a collapse could threaten the global financial sector, forcing taxpayers to come to the rescue.

But things haven't worked out that way. "Now, with their bailout costs amounting to billions of taxpayer dollars, SIFIs are larger than ever," Hoenig said.

Hoenig proposed rules that would prevent banks that take deposits from making trades--a shift away from the financial supermarket concept that has proliferated since the 1990s.

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The new capital requirements were agreed to by the Group of Governors and Heads of Supervision (GHOS), an international group of banking regulators meeting in Basel, Switzerland, this weekend. If the new rules are approved at the G20 summit in November, they'd force big banks to keep an additional 1-3.5 percent of extra capital on hand, so they'd be better able to weather big losses.

Another rule agreed to previously, with a similar goal, requires all banks to hold a minimum of 7 percent core capital at all times.

Not everyone thinks the new requirements, which even if approved won't go into effect until later in the decade, will make much difference. Slate's Bethany McLean argues that capital requirements wouldn't have prevented the 2008 crisis. But Felix Salmon of Reuters counters: "[W]hile the Sifi surcharge won't stop banks growing to the point at which they have to be bailed out in extremis, it might make such growth significantly less profitable than it was in the past."

What's clear, though, is that almost three years after a financial crisis that plunged the world economy into a deep hole and nearly brought down the global financial sector, there's little reason to believe the same thing couldn't happen again.