Last year, Attorney General Eric Holder Jr. described a federal court trial for the self-professed mastermind of Sept. 11 attacks, Khalid Shaikh Mohammed, as “the defining event of my time as attorney general.” On Monday, Mr. Holder’s dream for demonstrating the power of the American court system crumbled when he announced that the trial would take place not in New York City or anywhere in the United States but before a military commission at the Guantánamo Bay, Cuba, prison camp.

That retreat was a victory for Congressional pandering and an embarrassment for the Obama administration, which failed to stand up to it.

The wound inflicted on New York City from Mr. Mohammed’s plot nearly a decade ago will not heal for many lifetimes, yet the city, while still grieving, has thrived. How fitting it would have been to put the plot’s architect on trial a few blocks from the site of the World Trade Center, to force him to submit to the justice of a dozen chosen New Yorkers, to demonstrate to the world that we will not allow fear of terrorism to alter our rule of law.

But, apparently, there are many who continue to cower, who view terrorists as much more fearsome than homegrown American mass murderers and the American civilian jury system as too “soft” to impose needed justice. The administration of George W. Bush encouraged this view for more than seven years, spreading a notion that terror suspects only could be safely held and tried far from our shores at Guantánamo and brought nowhere near an American courthouse. The federal courts have, in fact, convicted hundreds of terrorists since 9/11. And federal prisons safely hold more than 350 of them.

The pandering toward this mentality began as soon as Mr. Holder announced his plan in 2009 to try Mr. Mohammed in Lower Manhattan. A group of senators, including Joseph Lieberman, an independent of Connecticut, complained that it would give terrorists a platform to rally others to their cause. Senator Charles Schumer, Democrat of New York, said the trial should be moved elsewhere because New Yorkers didn’t want it, as if prosecutors needed opinion polls to determine where to seek justice.

The final blow came from Mayor Michael Bloomberg, who originally accepted the trial but then gave in to downtown business interests that opposed it for reasons of inconvenience. His office promulgated the absurd notion that security would cost $1 billion. Congress then made the trial impossible last year with a measure prohibiting any spending to move prisoners from Guantánamo to the United States.

Mr. Holder was right to sound bitter about the decision at his news conference on Monday. But the Obama administration must shoulder some of the blame. As The New Yorker reported last year, it did little to prepare the political groundwork for a local trial and barely defended the idea after the unfounded attacks began.

Given the circumstances, Mr. Holder is right to push for a military trial for Mr. Mohammed, rather than let him linger in indefinite limbo. His decision will test whether reforms to the military commission system will allow for both a fair prosecution and a vigorous defense. But Monday’s announcement represents a huge missed opportunity to prove the fairness of the federal court system and restore the nation’s reputation for providing justice for all.