Both Democrats and Republicans have raised criticism of the Justice Department’s leniency when it comes to the prosecution of Wall Street banks for their roles in the housing crisis and financial collapse that sparked the Great Recession. But today, Attorney General Eric Holder told the Senate Judiciary Committee that the very size of those banks is what inhibits prosecution, Bloomberg reports:

Criminal charges against a bank — something that could threaten its existence — may also endanger the national or global economies in the case of the largest ones, because of their size and interconnectedness. That has “made it difficult for us to prosecute” some of those institutions, Holder said today at a Senate Judiciary Committee hearing.

“That is a function of the fact that some of these institutions have become too large,” Holder told lawmakers. “It has an inhibiting impact on our ability to bring resolutions that I think would be more appropriate.”

The six largest Wall Street banks have grown exponentially in recent decades and now hold assets worth more than 60 percent of the American economy. But despite widespread fraud, discrimination, and other predatory acts during and after the recent crises, the banks have largely escaped prosecution, drawing the ire of both Democratic and Republican senators.

Ohio Sen. Sherrod Brown (D) and Louisiana Sen. David Vitter (R) renewed their calls to break up banks in Senate speeches last week, and Massachusetts Sen. Elizabeth Warren (D) challenged regulators on the lack of prosecutions in a Banking Committee hearing in February. Brown and Iowa Sen. Chuck Grassley (R) wrote a letter to the Justice Dept. alleging that banks have become “too big to jail,” and Grassley has criticized the banks for having a “get out of jail free” card.

Financial prosecutions reached a 20-year low in 2011, as regulators and the Justice Dept. chose instead to settle claims with large banks over mortgage and foreclosure fraud and other scandals. But those settlements have been rife with problems, as banks have found different ways to game the settlements to their advantage.

Yesterday, Sen, Richard Shelby (R-AL) introduced new legislation to gum up implementation of the Dodd-Frank financial reform law, in the latest Republican effort to prevent bank regulations from going into effect. A bipartisan group of lawmakers today decided to get into the act, introducing a bill that would weaken rules meant to prevent banks from engaging in risky trading of derivatives with federally backed dollars:

U.S. House and Senate lawmakers introduced legislation that would allow more swaps trading to be conducted at banks that have federal insurance by repealing part of the Dodd-Frank Act.

The bipartisan measures call for altering the 2010 law’s requirement that banks with access to deposit insurance and the Federal Reserve’s discount window move some derivatives trades to separate affiliates that have their own capital.

Banks have already received a reprieve from these rules courtesy of regulators who have delayed its implementation, giving these lawmakers time to water it down. But as Marcus Stanley, policy director for Americans for Financial Reform, said, “the swaps-pushout provision is a really important part and something that absolutely should be a central part of the regulatory framework.” Economists Jane D’Arista and Gerald Epstein added, “the intent is to remove risky activities from the core banking functions that are essential to the economy and to ensure that those risky activities will not trigger the need for a bail out to prevent systemic collapse in the future as they did in the 2008 crisis.”

As financial expert Jennifer Taub noted, “Swaps have been at the heart of major financial crises since the bankruptcy of Orange County. The Long-Term Capital Management meltdown, the failure of AIG and the Greek debt crisis, share this common component.” Banks are already looking for creative ways to circumvent Dodd-Frank’s various limitations on risky trading (even as Wall Street profits skyrocket back to their pre-financial crisis highs). In this environment, the last thing that the financial system really needs is lawmakers aiding and abetting the ability of banks to gamble with taxpayer funds.

The European Commission today revised previous estimates showing that Europe would return to economic growth this year, now saying that the continent may be mired in recession until 2014 due in part to “record joblessness“:

The 17-nation bloc’s economy, which generates nearly a fifth of global output, will shrink 0.3 percent in 2013, the Commission said, meaning the euro zone will remain in its second recession since 2009 for a year longer than originally foreseen.

The Commission, the EU executive, late last year forecast 0.1 percent growth in the euro zone’s economy for 2012, but now says tight lending conditions for companies and households, job cuts and frozen investment have delayed an expected recovery.

Of course, one of the causes of record joblessness is the continued austerity to which Europe has been subjected thanks to, among others, the European Commission. This chart shows that austerity has gone hand-in-hand with economic contraction in Europe:

But the European Commission has shown no evidence that it plans to recommend a move away towards austerity. And Eurozone officials can’t even handle mild criticism of their continued adherence to a policy that has delivered none of the promised results without lashing out. In the meantime, misery on the continent continues.

Republicans in Congress have been pushing for the implementation of what’s known as a territorial tax system. Under such a system, the overseas profits of U.S.-based companies would be forever exempt from taxation. And the GOP is going to get a little help soon from a new lobbying entity, according to Politico:

The group — dubbed the LIFT America coalition — is in the process of seeking corporate members and hasn’t yet officially launched .

Partners, a Washington public affairs firm, is handling the group’s communications, recruitment and strategy.

Recruitment documents obtained by POLITICO indicate the group’s primary focus is pressing Congress to shift the corporate tax regime to a so-called territorial system in which companies are shielded from paying tax on most — if not all — of the profits they earn in other countries.

Currently, the U.S. corporate tax system exempts overseas profits until they are brought back to the U.S., giving companies little reason to ever bring them back. However, shifting to a territorial system would make that problem even worse. According to the Congressional Budget Office, a territorial system could “result in a less efficient allocation of resources among countries by increasing incentives to shift business operations and reported income to countries with lower tax rates.”

Switching to a territorial system would cost the U.S. about 800,000 jobs and more than $130 billion in revenue. As economist Jane Gravelle explained, a territorial system “would cause investment to flow abroad, and that would reduce the capital with which workers in the United States have, so it should reduce wages.” Already, corporate profits are at an all-time high, while worker wages are at an all-time low.

A poll released this morning by ABC News claims that Americans broadly support cutting the federal budget “along the lines of the sequester that took effect last Friday,” even as those cuts jeopardize the health of the nation’s economy. By a margin of 61-33, the poll found, Americans support a “five percent cut” in the overall budget (the actual cuts to the domestic budget are around 12 percent). And while they oppose defense cuts, their support for cutting the general budget supposedly stretches across party lines:

Support for a five percent reduction in federal spending crosses party lines in this poll, produced for ABC by Langer Research Associates; it includes 57 percent of Democrats, six in 10 independents and three-quarters of Republicans. Shaving eight percent off the military budget, on the other hand, is opposed by 73 percent of Republicans and 63 percent of independents, with Democrats split down the middle.

The poll, however, contains a fatal flaw that makes it virtually meaningless: it asks Americans only about the general idea of spending cuts, not about cuts to specific programs. In addition to the defense cuts Americans oppose, sequestration also means sweeping cuts to education, assistance for the poor, food and air travel safety, and every other federal program that wasn’t exempt from the law. And according to past polls that do ask about specific cuts, Americans don’t support cutting those programs. In fact, there is usually more support for increasing funding for specific programs than there is for cutting it, as the Pew Research Center found in February:

Of course, even if Americans do support cutting spending, that doesn’t make sequestration a smart policy idea. Government spending has traditionally helped pull the American economy out of recessions, spurring economic recoveries by making up for a lack of demand in the private sector and among consumers. But government spending levels have plateaued since 2010, and after stimulus spending initially boosted the economy, falling spending levels have hamstrung the current recovery.

In that sense, the idea Americans put forth in the Pew poll — that we should be increasing spending on targeted programs instead of cutting it — is a policy idea that would help bolster the recovery while avoiding the 700,000 lost jobs sequestration entails.