Holder said the U.S. has a national immigration problem that cannot be cured with a "state-by-state solution."
The top U.S. prosecutor said he understands the frustration behind the Arizona law, but he warned during an appearance on ABC's "This Week" that "we could potentially get on a slippery slope where people will be picked on because of how they look as opposed to what they have done."
The law empowers police to question anyone they suspect of being in the country illegally, and that could lead to what some see as harassment of the state's large Hispanic population.
Holder said the Justice Department was "considering all of our options," including a lawsuit either on grounds that the Arizona law had pre-empted federal powers or was a violation of federal civil rights statutes.
Shortly after being picked for attorney general, Holder, who is black, said the country was a "nation of cowards" because it had failed to confront the issue of race.
Asked on NBC's "Meet the Press" if his assessment still held, Holder said: "I think it's changed a bit. I still don't think we're at a place where we need to be. I think that we need to talk to each other more about race and the racial things that divide us, especially when one looks at the demographic changes that this nation is about to undergo."
The 2010 census is expected to show a large increase in Hispanic population.
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