I'm very glad someone is speaking up about this.
No moderator should have the possibility of permanently banning someone. A timeout (say a year at maximum) is plenty enough.
It is their community. If you are a shitty guest I throw you out of the house. It is their right to do so.
It's not though; it's Reddit's community. They give moderators the ability to do whatever they want with subreddits, but can (and not often enough do) get involved when particular subreddits bring them bad publicity. So many of Reddit's moderation policies were created when the founders expected Reddit to be used very differently, and are sometimes absurdly simplistic.