U.S. Naval ships were in position in the North Arabian sea ready to attack Usama bin Laden (search) between 1999 and 2001, but no spies were close enough to the terrorist leader to help us target him, Sen. Bob Graham (search), D-Fla., said Thursday.

Last year Graham served as chairman of the Senate Select Committee on Intelligence (search), which researched intelligence failures before Sept. 11. The report on those failures was released Thursday.

"The attacks of Sept. 11 could have been prevented if the right combination of skill, cooperation, creativity and some good luck had been brought to task," Graham told a news conference.

Click here to read the report.

The report describes a series of missed opportunities and government gaffes going as far back as 1998, when the intelligence community first heard that bin Laden was plotting an attack in the United States.

The report finds that in 1998, CIA Director George Tenet (search) declared war on bin Laden, but the FBI, Defense Department and others were not aware of Tenet's declaration.

The Pentagon and CIA, the report says, were at odds over what to do about Al Qaeda (search) camps in Afghanistan.

"Senior U.S. military officials were reluctant to use U.S. military assets to conduct offensive counterterrorism efforts" partly because they believed "the intelligence community was unable to provide the intelligence needed to support military operations," the report states.

A Series of Missteps

The declassified report, over 800 pages in length, concludes that no single bit of information could have prevented the Sept. 11 terrorist attacks, even though U.S. intelligence agencies failed to communicate with each other or stop Al Qaeda's buildup in the country.

"Our work started with the recognition of a sobering fact: Al Qaeda was better at planning the attacks and keeping their plans secret than the United States government was at uncovering them," said House Minority Leader Nancy Pelosi (search), D-Calif., ex-officio member of the committee.

While the authors look at problems within other agencies, including the CIA and National Security Agency (search), the report is particularly harsh on the FBI, noting a series of missteps.

For example, the CIA (search) and the FBI were aware in early 2000 that two of the hijackers, Khalid Al-Mihdhar and Nawaf Al-Hazmi, had ties to Al Qaeda and had made calls to the Middle East while living in San Diego. The two were later found to have been on the plane that crashed into the Pentagon.

In early 2000, the CIA had learned independently of the Al Qaeda connections of Al-Mihdhar and Al-Hazmi, but they failed to put the two on terrorism watch lists that might have prevented their entry into the United States.

The two also lived in the home of a longtime FBI (search) informant who was never made aware of who they were. That same informant may also have had contacts with a third hijacker, Hani Hanjour.

In that case, the FBI's San Diego field office did not get enough information from the CIA and FBI headquarters about the search for the hijackers. "As a result, the FBI missed the opportunity to task a uniquely well-positioned informant — who denies having any advance knowledge of the plot — to collect information about the hijackers and their plans in the United States," the report notes.

An agent from the San Diego office told the committee, "It would have made a huge difference'' if they had been privy to the intelligence.

Also, as far back as 1998, the intelligence community received reports that a member of Al Qaeda was planning operations on U.S. targets, including a scheme to hijack U.S. planes. In fact, two individuals "successfully evaded" checkpoints in a dry run at a New York airport, according to a December 1998 intelligence report cited by the joint committee.

A fall 1998 intelligence report says that Al Qaeda was considering a new attack using biological toxins in food, water or ventilation systems of U.S. embassies. And a spring 1999 intelligence report stated that bin Laden's supporters in Afghanistan were experimenting with enhancing conventional explosives with radioactive material, the report notes.

The report criticizes the FBI in particular for failing to devote resources to counterterrorism and failing to locate Al Qaeda cells in the United States. It also points at a larger, government-wide failure to take the threat of terrorism seriously.

"The criticism regarding the FBI's limited attention to the dangers at home ... reflects a large gap in the nation's counterterrorism structure ... a failure to focus on how an international group might target the United States itself," the report says. "No agency appears to have been responsible ... for regularly assessing the threat in the homeland."

Among the more troubling findings:

— The NSA had intercepted "some communications that indicated possible impending terrorist activity" between Sept. 8 and Sept. 10, but these were not translated or disseminated until after the attacks.

— The CIA had received unconfirmed intelligence before the attacks that suspected Sept. 11 mastermind Khalid Sheikh Mohammed (search) had been in the United States as recently as May 2001, possibly to meet with recruits and colleagues already in the country. Mohammed, Al Qaeda's director of operations, is now in U.S. custody.

— The Sept. 11 hijackers had substantial contacts around the world and were not isolated cells.

But even with all the failures, no "smoking gun" has emerged to suggest the government could have stopped the Sept. 11 attacks that killed more than 3,000 people in New York, Washington, D.C., and Pennsylvania.

"While the intelligence community had amassed a great deal of valuable intelligence regarding Usama bin Laden and his terrorist activities, none of it identified the time, place and specific nature of the attacks that were planned for Sept. 11, 2001,'' the report notes.

"There is no question there were some lapses of intelligence, failures of communication," said Sen. Trent Lott (search), R- Miss., who added that for 20 years the intelligence community had been ignored and had failed to modernize to change with the times.

"I think since then they have made and they are making efforts to do a better job, to exchange information, to communicate. Still, I think they have more they need to do, but this report will show that there were some things that should have been picked up on that could have been picked up on, that were not. I don't think there's any one defining moment that you can point to," Lott told Fox News.

Referring to the creation of a Homeland Security Department (search), improved information sharing between government agencies and efforts to freeze terrorist assets, White House spokesman Scott McClellan said the report "confirms the importance of the strong, aggressive stance we have already taken to better protect the American people at home and abroad."

Saudi Connection?

Parts of the report will remain classified, including a section that reportedly discusses whether there was any support for the hijackers from Saudi Arabia.

However, the report notes that the lack of Saudi cooperation may have contributed to the attacks.

"A high-level U.S. government officer cited greater Saudi cooperation when asked how the Sept. 11 attacks might have been prevented,'' the report notes.

For example, a Saudi individual may have been aware in May 2001 of an "upcoming al Qaeda operation'' but the Saudi government did not cooperate with the intelligence community both before and after the Sept. 11 attacks, the report notes.

Further, there are suggestions that the hijackers may have received "foreign support,'' but much of the information that could implicate the Saudi government remains classified.

"Through its investigation, the Joint Inquiry developed information suggesting specific sources of foreign support for some of the September 11 hijackers while they were in the United States,'' the report states. "The Joint Inquiry's review confirmed that the Intelligence Community also has information, much of which has yet to independently verified, concerning these potential sources of support.''

In July 2002, a CIA officer sent a cable expressing his concerns that "persons associated with a foreign government may have provided financial support to some of the Sept. 11 hijackers while they were living in the United States," the report notes.

An FBI agent based in San Diego ended up with a copy of the cable, but never sent it on to FBI headquarters. It should be noted that the joint committee did not talk to any Saudi government officials during its investigation.

McClellan said "80 percent" of the report is being made public, with only the most sensitive national security sections — for instance, sources' names — under wraps.

But Pelosi, who was ranking member on the House intelligence panel when the investigation began, decried the report as "overclassified" and said the administration's "obsession with secrecy does not serve the nation well."

"The administration's failure to cooperate fully with the joint inquiry showed an unwillingness to exhaust every effort to discover information that might assist in better protecting the American people," she said.

Fox News' Anna Stolley, Julie Asher, Malini Bawa and the Associated Press contributed to this report.