With us to discuss all of this and more two, key members of the Senate Select Intelligence Committee, Republican Trent Lott of Mississippi and Democrat Evan Bayh of Indiana.

Senators, thanks very much for joining us. I'll start with you, Senator Lott. What do you know about this targeting of Ayman al Zawahiri?

SEN. TRENT LOTT (R), MISSISSIPPI: I don't know a lot about it. I believe that the intelligence has indicated that he had been in that area. And obviously, we have evidence that some of the leaders of the former Al Qaida are in Pakistan.

So I think this was a justified strike. But I think we ought to wait and get the full report on it. We ought to wait and see if nothing else who actually was there and who was killed.

But how else are we going to be able to get at the leaders of what's going on in Iraq? I mean, it is being directed, we know for sure, in some instances from Pakistan. And my information is that this strike was clearly justified by the intelligence.

BLITZER: The information I'm getting from some former U.S. intelligence officials, Senator Bayh, is that before the CIA were to launch an air strike of this nature using these predator drones, they are on pretty good -- they insist they have to have a pretty high threshold in order to justify an attack on a house like this because presumably there could be what they call "collateral damage," innocent women and children, families being killed. You're regularly briefed on these kinds of targeted assassinations, as some call them.

SEN. EVAN BAYH (D), INDIANA: And I just got back from that part of the world, Wolf. The standard of proof before an operation like that is extraordinarily high. You don't do something like that without pretty good evidence.

Now, it's a regrettable situation, but what else are we supposed to do? It's like the wild, wild west out there. The Pakistani border's a real problem.

We have solid information that the top Al Qaida leadership is being harbored in that part of Pakistan. Assassination attempts against Musharraf himself have been launched from that part of Pakistan.

So the real problem here is that the Pakistani government does not control that part of their own country, and these people, some of whom you just saw on your film there, are harboring these Al Qaida leaders. So regrettably this kind of thing is what we're left with.

BLITZER: The U.S. has a very close relationship with President Musharraf of Pakistan. You were just there, Senator Bayh. It's hard for me to believe, but maybe I'm wrong, that before the U.S. -- whether the CIA or the military were to launch this kind of operation, at least some very close intelligence officials to the Pakistani president would be clued in.

BAYH: Of course, I do think you're correct to give President Musharraf credit for the way he has shown courage and leadership, and he has worked with us. He does prohibit U.S. troops from being based there in his country. So, he's shown leadership, but he also has shown awareness that the people would be concerned about us actually having troops there.

But in answer to your question, I have every reason to believe that there was some communication at higher levels of the government. And you know, one criticism was that we have some indication the CIA had been watching the terrorists there for some several days. Maybe they should have made the strike earlier.

I'm not being critical. But this was based on good intelligence, and I feel that, you know, the government at some high level was aware that this action was going to be taken.

BLITZER: It's a very sensitive issue for the U.S.-Pakistani relationship, for President Musharraf. I want to play for our viewers in the midst of these angry demonstrations that we've seen, "death to America" and all this kind of stuff in Pakistan, a sort of measured statement coming from the Pakistani government's information minister. Listen to this.

(BEGIN VIDEO CLIP)

SHEIKH RASHID AHMAD: We deeply regret that civilian lives have been lost in an incident in Bajoradensi (ph). While this act is highly condemnable, we have been for a long time striving to rid all of our tribal areas of foreign intruders who have been responsible for all the miseries and violence in the region.

(END VIDEO CLIP)

BLITZER: When he refers to foreign intruders, he's referring to Egyptians, shall we say, like Ayman Al Zawahiri, or Saudis like Osama Bin Laden, Al Qaeda operatives, who may be in that area. As far as you know, and you were just there, is the Pakistani government fully cooperating with the U.S. government in the hunt for Al Qaeda?

BAYH: As far as I know, Wolf, they are. As a matter of fact, they're putting tens of thousands of troops into this area in an attempt to bring it under control. But Pakistani troops are being killed. Twenty of them -- well, nine were killed. Eleven were taken hostage while we were there. So they know they've got a problem. They know there are these Al Qaeda leaders there. They know that the tribes there give them sanctuary. And they're beginning to try and exert their control there. But they've got a domestic political problem. So it's a balancing act. How do they go about trying to bring that area under control, cooperate with us without causing the kind of political problems that would destabilize the government?

BLITZER: And I take it neither of you would have a problem with the U.S. government targeting for assassination either Ayman Al Zawahiri or Osama Bin Laden, who presumably is still at large?

LOTT: I would have a problem if we didn't do it. There's no question that they're still causing the death of millions of -- or thousands of innocent people and directing operations in Iraq. Absolutely we should do it.

BLITZER: What about you, Senator Bayh?

BAYH: I agree wholeheartedly, Wolf. These people killed 3,000 Americans. They have to be brought to justice.

BLITZER: Why is it so hard to find Osama Bin Laden? We haven't heard from him in more than a year, since before the last U.S. presidential election.

BAYH: Well, Zawahiri issues these tapes. He's a little bit more in touch with the other Al Qaeda members. You ought to fly over this area. It is huge, it is remote, it is mountainous, and these tribes are harboring him. Once you've seen it, it's no wonder it's hard to find him. And he's hiding out somewhere. He's not really communicating the way Zawahiri is.

BLITZER: Let's talk about Iran a little bit. This past week, as you know, Senator Lott, the Iranians broke those seals from the nuclear facilities that they have, causing the Europeans -- the British, the French, and the Germans -- to say negotiations are over with, it's time now to perhaps go to the United Nations security council. The president was very firm on this as well. Listen to what President Bush said.

(BEGIN VIDEO CLIP)

BUSH: The current president of Iran has announced that the destruction of Israel is an important part of their agenda. And that's unacceptable. And the development of a nuclear weapon, it seems like to me, would make him a step closer to achieving that objective.

(END VIDEO CLIP)

BLITZER: Earlier, just a little while ago, Senator McCain was on "Face the Nation" on CBS. He was very strong on this issue. Let me just paraphrase. He said the United States has to act, has to go for U.N. sanctions, even if it means the price of oil will go up. As you know, Senator Lott, Iran is a major exporter of oil, and they're threatening to take action if these sanctions were to be imposed.

LOTT: Well, we can't be intimidated by economic threats from their side. I'm pleased that the European allies -- the British, the French, and the Germans -- are taking the position they're now taking. I'm following it with interest, the Russian position, which also seems to be critical of what the Iranian government is doing with nuclear weapons.

This is very serious stuff. There may not be the threat of imminent ability to deliver a nuclear weapon. But clearly that is, you know, indicated by what they've said and how they're acting. How more irresponsible can they be? They're denying, they're going to have a hearing on the Holocaust, like it never happened. And the comments about Israel should be wiped off the face of the earth. This is very serious. We'll have to watch the Chinese.

But we have to deal with this very seriously. Perhaps methodically. We have to do everything we can diplomatically. At the very minimum, we should go to the U.N. Security Council, and we should impose economic sanctions unless there's some dramatic change in the Iranian position.

BLITZER: He was at a news conference, spent two hours at a news conference yesterday, the president of Iran, Mahmoud Ahmadinejad. Here's what he said in part in answer to this question about Iran's nuclear intentions. Listen to this.

(BEGIN VIDEO CLIP)

PRES. MAHMOUD AHMADINEJAD, IRAN (THROUGH TRANSLATOR): We have developed nuclear energy for peaceful purposes, but they want us to stop our progress, and I think we are not allowed to have one, and we want to know why.

[CORRECTION -- Due to an error in translation, CNN incorrectly quoted Iranian president Mahmoud Ahmadinejad in his speech as saying that Iran has the right to build nuclear weapons. In fact, President Ahmadinejad said Iran has the right to nuclear energy, and that "a nation that has civilization does not need nuclear weapons," and "our nation does not need them." This transcript has been corrected. CNN takes this matter very seriously and apologizes for the error.]

(END VIDEO CLIP)

BLITZER: All right. The Iranians say, why can these other countries like India or Pakistan or Israel for that matter have nuclear weapons? They deny that they're building a nuclear weapon, but why this double standard against Iran? That's basically the thrust of their argument.

BAYH: There's no double standard, Wolf. Iran is the foremost sponsor of terrorism in the world. Every country I visited -- Israel, Pakistan, Afghanistan, Iraq -- the Iranians are a force for instability and death. And in Iraq, they're now causing the deaths of Americans.

They have called for the destruction of another member state, Israel, a clear violation of the U.S. charter. None of the other countries you mentioned have done that. The president, who you just showed on there, asked an audience of thousands of students in Tehran to imagine a world in which there was no United States of America.

Iran is a menace, Wolf. They have to be dealt with, through economic, political, and cultural steps. And I'll just say one final thing. I'm glad the president is finally speaking out about this. But for four long years they have ignored this problem. It's brought us to the position that we're in today. And it has undermined the national security interests of the United States.

BLITZER: We have to take a quick break but very briefly, is there a military option, realistically speaking, given the U.S. involvement in Iraq, the fact that U.S. troops may be stretched about as much as possible right now? Realistically, against Iran is there a credible U.S. military option?

BAYH: Yes, but we don't want to go there. There are sensitive nodes in their program that could be struck that would dramatically delay its development. But that should not be an option at this point.

We ought to use everything else possible to keep from getting to that juncture, Wolf, because denying this problem for four years has brought us to a dilemma. On the one hand, we don't want to use military force. On the other hand, a nuclear-armed Iran is not acceptable.

BLITZER: Senator Lott?

LOTT: Regardless of what's going on in Iraq, you know, we have the capability. We could take action. But it would be difficult, and we have to see if there are other options that would have the desired effect before we would consider there going there.

BLITZER: Stand by, senators. We're going to take a quick break. Lots more to talk about here on "Late Edition," including the nomination of the U.S. Supreme Court nominee Samuel Alito, now almost certainly headed to the Senate floor for confirmation. I'll ask both senators whether they will vote to confirm.

And in Iraq, more bloodshed this week. Is there a political solution in sight? We'll talk with one of Iraq's senior diplomats.

Also, four years after 9/11, where is Osama bin Laden? We'll hear from a panel of terrorism and surveillance experts. "Late Edition" continues right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back to "Late Edition." We're continuing our conversation with Democratic Senator Evan Bayh of Indiana, Republican Senator Trent Lott of Mississippi, both members of the Senate Intelligence Committee.

Here's what President Mahmoud Ahmadinejad said in December, December 14th, on this issue of the Holocaust: "They have invented a myth that Jews were massacred... The West has given more significance to the myth of the genocide of the Jews, even more significant than God, religion, and the prophets. If you have burned the Jews, why don't you give a piece of Europe, the United States, Canada or Alaska to Israel?"

And now, the Iranian Foreign Ministry announced they're going to have a conference, a scientific conference, to discuss the Holocaust after what their president said. What do you make of this?

BAYH: Well, if anyone had any doubt about the radical, almost delusional nature of the Iranian regime, Wolf, this is it. I would simply tell the president -- I think Holocaust denial is actually against the law in Germany.

And, you know, to deny history like this, this virulent anti- Semitism, their sponsoring of terrorism, their search for a nuclear weapon ought to be a wake-up call to every American.

Appeasement won't work. You know, nice words won't work. We need to use diplomacy, economic sanctions, other means so we won't have to resort to military action.

But the time to act, Wolf, is now. We've been in denial for four long years.

BLITZER; Senator Lott?

LOTT: I can't add a whole lot to that. I mean, obviously, there is a serious problem here. How would they would explain what our U.S. troops found when they got to the site where Jews had been slaughtered?

And it is symptomatic of what's going on there and symbolic of it. We have a real problem. We haven't been ignoring it. We have been working with our European allies. We've tried to get them to act reasonably.

On occasion, they act like, well, maybe we're not going to move toward this nuclear capability. And then they revert right back to it. It is a serious problem, probably, right, now the most serious in the world.

BLITZER: You were just in Iraq, just came back. What's your bottom line assessment, Senator Bayh?

BAYH: Oh, Wolf, very difficult, very complicated. The good things are our forces are performing heroically. Secondly, the election went well. There was a large turnout. And that's good. The political process is starting.

But the difficulty is that the people of Iraq voted almost exclusively along religious and ethnic lines. They are a deeply divided society. And the insurgency continues to be very difficult.

So, the bottom line question, Wolf, is, do they want to live together in the same country or not? Are they willing to settle their differences through politics or will they insist on violence?

We can help them if they choose the former courses, but if they choose the latter, this is going to be very difficult for a long period of time.

And the final thing I'd say is, continue to build up their capacity to provide for their own security, so we can begin to hand this off. The next six to nine months -- that's really going to tell us a lot about the future course of events.

BLITZER: There are some polls -- I want to put some numbers up on the screen, Senator Lott, CNN/USA Today/Gallup polls that came out recently: "How are things going for the U.S. in Iraq?" Forty-six percent of the American public said "well." Fifty-three percent said "badly."

Another poll: "Was it worth going to war in Iraq?" Back in November only 38 percent said "yes." Now, 46 percent say yes; 52 percent, a majority, continue to say no, it was not worth going to war in Iraq.

And this number: "Within the next 12 months, will there be a democratic Iraqi government that can maintain order without U.S. troops?" Only 19 percent of the American public said "yes." Seventy- five percent said "no."

The American public remains very worried about what's going on in Iraq.

LOTT: Well, we have to be worried because we're still making a huge commitment there and a sacrifice. But we tend too much, I think, to focus on the negative.

I do think we need to look at a lot of the positive milestones that have been met. Of course, Saddam Hussein is going to trial. They have had three elections in the last year and the people voted in increasing numbers.

Did they vote along regional and ethnic lines? Yes. You know, welcome to democracy. I'm not totally surprised by that. But the people have shown an increasing interest in that.

And I do believe that those that say democracy and freedom have a tremendous lure, even in a place like Iraq, are right. Do they still have problems? Yes, they're trying to form a government.

It's hard for the Kurds and the Shiites to bring in the Sunnis and make sure that they are part of that government. But they've got to move in that direction.

And we've got to continue to work to improve their police and military capability. Overall, though, progress is being made and we should acknowledge that.

BLITZER: Senator Bayh, you voted against the confirmation of John Roberts, who's now the Supreme Court Chief Justice.

How will you vote on Samuel Alito's nomination?

BAYH: I don't know yet, Wolf. But I think both of these sets of hearings and this whole judicial nominating process is a clear example of how Washington is broken. It's become a process where the nominees come before the committees and say as little as possible or are, in too many instances, evasive, don't want to say anything controversial.

On the other hand, too often the people who are asking the questions are playing a game of "gotcha." And so, it puts people like me in a position, a real dilemma.

I want to know what the man really thinks, whether he has an ideological agenda or not. And because of this kabuki theater that takes place, in too many instances, we just don't know.

BLITZER: So, you don't know right now?

BAYH: I just don't know because the question I want to ask myself is: Is this man going to go for a lifetime appointment on our nation's highest court from which there is no appeal with an ideological agenda of some kind or not?

I think he bears the burden of proof of showing us that he does not. But, if the process does not shed much light onto that, what do you do?

BLITZER: How are you going to vote?

LOTT: I'm going to vote for him. But I didn't just jump to that conclusion. I think I proved, with an earlier recommendation for the Supreme Court, that I won't just follow, sort of, the party line or go for anybody. I expressed reservations about the qualifications of Ms. Miers when she was nominated. I've looked at this nominee; I've looked at his record; I met with him; I listened to a good portion of the hearings. I thought they were, frankly, an embarrassment, almost comical in some respects, and I think that's a tragedy.

I think we're making it more and more difficult for good men and women to be willing to go through the meat grinder that you have to go through in Washington in the confirmation process.

He is a conservative. You know -- surprise. But he has a moderate style of life. He is extremely well qualified and experienced. I think he's an excellent nominee. And I predict he will be confirmed by a wide margin.

BLITZER: We're almost out of time, but a couple questions to both of you. There's word out there that you may be leaving, retiring from the U.S. Senate, making an announcement even in the next few days. Is that true?

LOTT: I spent the Christmas holidays in my state visiting with the people that I love the most, my relatives, my neighbors, people on the Mississippi Gulf Coast that were devastated by Katrina.

It's been a complicated decision because of all that we've been through in the last year. But my heart is with the people there and I'm going to do everything I can to be helpful to them as long as it's necessary. And I have that capability.

But, any announcement on that, I plan to begin with announcements in my hometown of Pascagoula, Mississippi on the Mississippi Gulf coast Tuesday and then in Jackson later on in the day.

BLITZER: So, you'll make an announcement one way or another whether you're going to seek re-election or retire?

LOTT; That's right.

BLITZER: So, we'll have to wait till Tuesday?

LOTT: Yes, I'm afraid so.

BLITZER: When are we going to hear whether or not, Senator Bayh, you're going to run for the Democratic presidential nomination?

BAYH: I suspect you'll hear from Trent before you hear from me, Wolf.

BLITZER: You're not going to announce that before Tuesday?

BAYH: And not in Pascagoula, with all due respect.

LOTT: We'd be glad to have you, though.

BAYH: Well, thank you, Trent. I appreciate that.

I wish Trent and Tricia well with whatever they decide.

And look, Wolf, I'm increasingly concerned about the tone here in Washington, that it's just disconnected from the rest of the country. And we really do need leaders who will change the tone, who will make progress, not focus on ideology and partisanship.

And I'm giving serious thought as to what role I might play in all that but won't make a decision until after the midterm elections.

BLITZER: But you're leaving that option open?

BAYH: Yes.

BLITZER: Senators, good luck to both of you, Senator Bayh. Senator Lott, we'll be covering your announcement on Tuesday, whatever it is. Appreciate it very much.