James Pethokoukis reports that Jon Huntsman has proposed a solution to the problem of banks that are too big to fail. Huntsman’s six-point list:

1. Set a hard cap on bank size based on assets as a percentage of GDP. (This cap would be on total bank size, not using any of the illusory “risk-weights” currently central to thinking about bank accounting. The lowest risk assets for banks in Europe, supposedly, are sovereign debt-yet this very same debt is now at the heart of the current crisis.

2. We should have a similar cap on leverage-total borrowing-by any individual bank, relative to GDP.

3. Explore reforms now being considered by the U.K. to make the unwinding of its biggest banks less risky for the broader economy.

4. Impose a fee on banks whose size exceeds a certain percentage of GDP to cover the cost they would impose on taxpayers in a bailout, thus eliminating the implicit subsidy of their too-big-to-fail status. The fee would incentivize the major banks to slim themselves down; failure to do so would result in increasing the fee until the banks are systemically safe. Any fees collected would be used to reduce taxes for the broader non-financial corporate sector.

5. In addition, focus on establishing an FDIC insurance premium that better reflects the riskiness of banks’ portfolios. This would provide an incentive for banks to scale down, allowing the financial system to absorb them organically in the event of a collapse.

6. Strengthen capital requirements, moving far beyond what is envisaged in the current Basel Accord. The Accord is a mixture of regulatory oversight and political compromise. As a result, the U.S. has allowed its banking policy to be determined by the “least common denominator” among European and Asian countries, many with a long history of not being prudent.

Although Huntsman is thought of as a no-hoper, he (and other GOP candidates) can influence the primary and the general election by pressing important issues, on the campaign trail and in the debates. Too-big-to-fail banks are a problem that, for various reasons, Republican candidates haven’t addressed, and it would be good if the frontrunners were compelled to take a stand on banking reform.

As for Huntsman’s specific plan, it includes some attractive features, although though it’s questionable whether the central element — capping banks’ absolute size — would be remotely politically feasible. It’s good that he has specified that the “size” fee would be used to reduce taxes across the board, eliminating the confusion that often arises with such “sin taxes” regarding whether they are intended to discourage certain behaviors or raise revenues.

And although Huntsman deserves credit for proposing an alternative to Dodd-Frank, which will not solve the problem of too big to fail, he should also outline a replacement for the mechanism for safely unwinding failed banks contained in Dodd-Frank. Inevitably some banks will become too big to fail, or at least big enough to leave the market uncertain as to whether the government will allow them to fail. The government should have a clear and understandable process already in place for resolving such firms in a moment of crisis, so that the uncertainty is reduced. The process put in place by Dodd-Frank is flawed, but it can’t be simply repealed and not replaced.

Huntsman is doing Republicans a favor by criticizing the public’s implicit subsidization of large banks — an issue that has both technocratic and populist appeal. Hopefully his plan will be taken as a challenge by the other candidates.