WASHINGTON (MarketWatch) — Attorney General Eric Holder, the top U.S. law-enforcement official, finally admitted this week that bank executives truly are above the law and may commit crimes with virtual impunity.

Appearing before the Senate Judiciary Committee, Holder acknowledged under questioning by Republican Chuck Grassley of Iowa, the ranking member, that the megabanks are too big to jail. “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them,” Holder said. Read related commentary by David Weidner: Benghazi on Wall Street.

Attorney General Eric Holder tells the Senate that the biggest banks have a get-out-of-jail-free card. Reuters

He continued: “When we are hit with indications that if you do prosecute — if you do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy. I think that is a function of the fact that some of these institutions have become too large.”

Holder went on to suggest that, until Congress does something about it, the size of these banks will preclude bringing them to justice.

“I think it has an inhibiting influence, impact, on our ability to bring resolutions that I think would be more appropriate,” Holder said. “I think that’s something that we — you all — need to consider.”

While maintaining that the Justice Department has been “appropriately aggressive” in pursuing fraud at the banks, Holder conceded that levying a fine that is a small percentage of profit is far less effective in scaring bank executives into obeying the law than putting some individuals in jail.

“You are right, senator,” Holder replied to another question from Grassley. “The greatest deterrent effect is to prosecute the individuals in the corporations that are responsible for those decisions.” Listen to a webcast of hearing on Senate.gov.

Grassley and Sen. Sherrod Brown, an Ohio Democrat, have been pushing the Justice Department on the issue and have asked for the names of the outside “experts” officials say advised them that it would threaten financial stability to prosecute big banks. Read letter from Brown and Grassley to Holder at Senate.gov.

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In a Congress marked by polarization and intransigence, this pursuit of answers as to why banks have not been punished for the widespread abuses that led to a near-collapse of the financial system five years ago has remained truly bipartisan.

Brown, chairman of the Senate subcommittee on financial institutions and consumer protection, announced last week that he and Sen. David Vitter, a Louisiana Republican, will be crafting legislation addressing the too-big-to-fail issue.

The two senators pushed through a bill last year mandating the Government Accountability Office study the economic benefit to the big banks from the market’s perception that they are, in fact, too big to fail.

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While Grassley and Brown rightly zero in on the shadowy “experts” cited by both Holder and former Assistant Attorney General Lanny Breuer as providing advice on the impact of indicting big banks, the lawmakers need look no further than ex–Treasury Secretary Timothy Geithner to see where Justice is getting its guidance.

In what has become known as the “Geithner doctrine,” documented by numerous eyewitnesses to the administration’s deliberations on the financial crisis, the former Treasury chief consistently advocated preservation of the banks as the paramount objective in any measure.

As a result, as Democratic Sen. Elizabeth Warren of Massachusetts noted in a statement following Holder’s testimony Wednesday: “It has been almost five years since the financial crisis, but the big banks are still too big to fail … and are still not being held fully accountable for breaking the law.”

At a hearing last week, Warren took Federal Reserve Chairman Ben Bernanke to task for the “subsidy” reaped by the big banks from the perception that they are too big to fail, which a study by Bloomberg evaluated at $83 billion.

Bernanke countered that any benefit was a result of market perceptions, but he became less convincing as he argued that the perception was inaccurate because the Fed would not bail out the banks again.

Read Rex Nutting's column: Break up the too-big, too-dangerous banks.

While Holder may have been too quick to let himself off the hook regarding criminal prosecutions, he was right that it will be up to Congress to rein in the banks, since it has clearly been beyond the capability of President Barack Obama and his administration.

But Holder has perhaps done us all a favor by openly admitting that, until Congress does act, banks will remain too big to jail. The issue will no longer be an arcane matter for “experts” to decide but a question for the nation of how serious we are about preserving the rule of law.