Hi, LW Community Team here.
We've made efforts to avoid the kind of supermods that existed on Reddit, and this is a great example. We've tried to have more mods with fewer communities each, and to limit the number of major communities under the same mods. This was a disagreement between two mods of major LW communities, FlyingSquid at worldnews and Blackbeard as a moderator of News and PoliticalDiscussion. Notably, this seems to be a disagreement from a couple months ago.
FlyingSquid moderates one major politically involved community (the other is closed). If Blackbeard wanted to ban him from News for report abuse, he certainly could have done that. Admins and the Community Team here try not to get overly involved in individual communities, and that wouldn't seem extremely out of line.
Blackbeard seems to have been concerned about getting side-wide banned by Flying. I've seen no evidence of anyone using the bot outside of extremely obvious scammers, trolls, and ban evasion. And I don't believe FlyingSquid would use that bot inappropriately. If that does become a problem, we'd absolutely take action. You always have the options to appeal directly to the admins (email in the LW sidebar). Currently, it's nice to have the extra help in keeping scams and spam off the site.
I do wish Blackbeard had talked to us about his concerns. He seemed to be pretty reasonable from my interactions with him. He'd be welcome back if we could get through this misunderstanding.