In an article titled “Too Big to Jail,” Randall W. Forsyth of Barron’s describes one of the most disturbing elements of the overly cozy relationship between government and the nation’s largest banks.

[T]he bailouts have left the bankers who caused the crisis largely blameless, which last week puzzled Senator Charles Grassley, the Iowa Republican who has long had an interest in financial matters. In a hearing of the Senate Judiciary Committee on Wednesday, he expressed concern to Attorney General Eric Holder that some institutions had become “too big to jail,” even HSBC (ticker: HBC), the U.K.-based bank that agreed last year to a record $1.9 billion penalty to settle money-laundering charges.

According to the transcript of the hearing: “I don’t have a recollection of [the Department of Justice] prosecuting any high-profile financial criminal convictions in either companies or individuals. Assistant…Attorney General Breuer said that one reason why DOJ has not brought these prosecutions is that it reaches out to, quote-unquote, experts to see what effect the prosecutions would have on the financial markets.”

In a stunning response, Holder agreed: “The concern that you have raised is one that I frankly share. And I’m not talking about HSBC now, because that may not be appropriate. But I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them 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. And I think that is a function of the fact that some of these institutions have become too large.”

In other words, the nation’s chief law-enforcement official admitted the decision to prosecute depends not on the law, but the impact on the financial markets and the domestic and global economy from these megabanks.