"The counterterrorism system failed," Leiter (at left) and Blair told the committee. "We didn't do things well and we didn't do things right."
"Within the Intelligence Community we had strategic intelligence that al Qaeda in the Arabian Peninsula [AQAP] had the intention of taking action against the United States prior to the failed attack on December 25th, but we did not direct more resources against AQAP, nor insist that the watchlisting criteria be adjusted prior to the event. In addition, the Intelligence Community analysts who were working hard on immediate threats to Americans in Yemen did not understand the fragments of intelligence on what turned out later to be Mr. Abdulmutallab, so they did not push him onto the terrorist watchlist," Letier told the committee.
The two intelligence executives said that U.S. intelligence teams gather more than a billion bits of data and add hundreds of people to the terror watchlist daily.
Special Report: The Christmas Day Terror Attack
"Each day, NCTC receives literally thousands of pieces of intelligence information from around the world, reviews literally thousands of different names, and places more than 350 people a day on the watchlist — virtually all based on far more damning information than that associated with Mr. Abdulutallab prior to Christmas Day, he said. "Although we must and will do better, we must also recognize that not all of the pieces rise above the noise level."
Blair said that pressure from Congress "was going the other way" over the last few years in how the terrorist watchlist and no-fly lists were handled. "Why are you searching grandmothers?" was a too-common refrain, he said. "I should not have given in to that pressure," Blair said.
Blair asked for more Congressional oversight to help keep the intelligence community focused on its job. "The trick is to keep the pressure on when a crisis doesn't happen," he said.
Leiter further defended the intelligence community, describing it as an "adaptive, learning organization" that "can and must outthink, outwork and defeat the enemy's new ideas."
"We can and will do better," he said, but said that the intelligence community can't "stop all attacks indefinitely."
In terms of doing better, Leiter outlined four areas for improvement:
• Reaffirm and clarify roles and responsibilities of the counterterrorism analytic components of the intelligence community in synchronizing, correlating, and analyzing all sources of intelligence related to terrorism.
• Accelerate information technology enhancements, to include knowledge discovery, database integration, cross-database searches, and the ability to correlate biographic information with terrorism-related intelligence.
• Take further steps to enhance the rigor and raise the standard of tradecraft of intelligence analysis, especially analysis designed to uncover and prevent terrorist plots.
• Ensure resources are properly aligned with issues highlighted in strategic warning analysis.
Daniel Farber is editor-in-chief of CBSNews.com.