An annual report from a regional Federal Reserve bank is typically a collection of banalities and clichés with some pictures of local worthies who serve on the board.

And so it is with this year's annual report from the Federal Reserve Bank of Dallas, whose pages are graced by the smiling, stolid portraits of board members who run local companies like Whataburger Restaurants.

But the text is something else entirely. It's a radical indictment of the nation's financial system. The lead essay, which is endorsed by the president of the Dallas Fed, contends that despite the great crisis of 2008, a cartel of megabanks is still hindering the economic recovery and the institutions remain too big to fail.

The country's biggest banks look much as they did before the 2008 financial crisis -- only bigger. They have "increased oligopoly power" and "remain difficult to control because they have the lawyers and the money to resist the pressures of federal regulation," Harvey Rosenblum, the head of the Dallas Fed's research department, wrote in the essay.

Having seen the biggest banks make risky bets, crush the economy and get rewarded leaves "a residue of distrust for the government, the banking system, the Fed and capitalism itself," Mr. Rosenblum wrote.

It's one thing for the Occupy movement to point out how bailing out the biggest banks -- with little cost to their executives or shareholders and creditors -- has demolished credibility. It's quite another for top officials in the Federal Reserve system to put it in an annual report.

As for Dodd-Frank's "resolution authority" -- the power to dissolve big financial institutions that Barney Frank famously hailed as a death panel for banks -- well, not so much. "For all its bluster, Dodd-Frank leaves TBTF entrenched," Mr. Rosenblum wrote, using the acronym for "too big to fail."

Yes, Dodd Frank has mechanisms in place to prevent taxpayer bailouts of the largest banks, he concedes. Banks are supposed to have "living wills" that explain how they could be seized and wound down while minimizing the use of taxpayer money.

But the Dallas Fed is deeply skeptical that this would work in real life.

"We know under the current structure that the government would be called on once again," the president of the Dallas Fed, Richard W. Fisher, told me. He has been giving a series of speeches about the continuing problem of "too big to fail."

The biggest banks are like Aspen trees (to borrow a famous, but incorrect, metaphor made by Scooter Libby in a different context): their roots are intertwined and they turn color at the same time. "If you believe the next time the problem will center on one institution and one only, I cross my fingers and am reasonably confident" that regulators will be able to liquidate it in an orderly fashion, Mr. Rosenblum told me. But that one institution would have to be largely in one market, with few lines of business and few connections to other institutions.

Obviously, there's almost no giant financial institution that fits that description. It's more likely that the next crisis will be similar to this one, one with "too many to fail," Mr. Rosenblum contends.

Another problem, the report points out, is that the decision now doesn't rest with the Fed or some institution that has some slight hope of being neutral, but with the Treasury secretary and the president. In other words, saving a big bank now will be even more political than before. Sure, some future president could act courageously, but the Federal Reserve bankers in Texas aren't so naïve as to see that as likely.

Crucially, the Dallas Fed argues that these problems are making the system vulnerable to a future crisis and that the financial oligopoly is undermining the economic recovery and the Fed's efforts to revive growth.

"Monetary policy cannot be effective when a major portion of the banking system is undercapitalized," Mr. Rosenblum wrote in the report. "Many of the biggest banks have sputtered, their balance sheets still clogged with toxic assets accumulated in the boom years."

Unfortunately for our banking regulation system, critics in the regional Federal Reserve banks haven't had much influence on regulatory policy.

One reason is that the regional Fed officials seem to be talking their own book, or can be dismissed as doing so. Outside of New York, Richmond, Va., and San Francisco, the regional Feds oversee only the small and midsize banks that compete with the "too big to fail" banks. The small guys suffer when the big banks are unfairly subsidized by the government, so the regional Feds can be brushed off as merely cheerleading for their team.

Mr. Fisher explained to me that, on the contrary, the Dallas Fed should be heeded because it has experience with "too big to fail": During the savings-and-loan crisis of the late 1980s and early '90s, some of the biggest banks to fail were from Texas.

But another major reason that they are disregarded may be that the rebel regional Fed presidents have been skeptical about the Fed's aggressive and successful monetary policy and overly worried about inflation and the vulnerability of the dollar. That may have undermined their solid case on bank regulation.

Mr. Fisher, the Dallas Fed president, has been one of the fiercest inflation hawks. He has dissented against the Fed's efforts to buy longer-term assets, known as quantitative easing, which was an effort to stimulate the economy. (He has been less worried about inflation more recently, arguing that unemployment is the top problem for the economy.)

"Sound money and sound structure go hand in glove," Mr. Fisher said.

Thomas M. Hoenig, the former president of the Kansas City Fed, also articulated strong, compelling views on bank regulation coupled with a hard-money fever that is discredited in most economic circles. (Mr. Hoenig has been nominated to be vice chairman of the Federal Deposit Insurance Corporation, which -- an economist might say -- is his highest and best use.)

The top bank regulators at the Fed, meanwhile, have embraced unorthodox monetary policies, but have also had scant courage and originality in challenging the current structure of the country's financial system.

Not so with the Dallas Fed. Its report champions "the ultimate solution for TBTF -- breaking up the nation's biggest banks into smaller units."

Hear, hear.