Since the financial crisis, academics, politicians and even former bank chieftains have called for the nation’s banking behemoths to be broken up or shrunk — calls that appear to have fallen largely on deaf ears among Washington’s policy makers.

Now, a powerful insider has suggested a simple tool that could place a tight limit on the size of individual banks. Daniel K. Tarullo, a Federal Reserve governor who oversees bank regulation, said in a speech last week that an important part of a bank’s balance sheet could be capped at a set percentage of the nation’s gross domestic product.

That a regulator at the Fed — the most powerful of the banking industry’s overseers — would say that such a structural overhaul of the financial system might be considered, was a sign that the policy debate over what to do about “too big to fail” might be shifting.  Read more