The following is a rush transcript of the December 27, 2009, edition of "FOX News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: Christmas brought an unwanted surprise this year: A Nigerian man claiming to be linked to Al Qaeda attempted to set off a device aboard a transatlantic flight that was about to land in Detroit.

Here now with the latest is Fox News' Catherine Herridge, who covers national security.


CATHERINE HERRIDGE, FOX NEWS: Chris, according to the criminal complaint, the 23-year-old suspect is being charged with attempting to destroy Flight 253. Sources tell Fox it is a holding charge and more charges are expected.

The device, which sources say is being analyzed by the FBI Labs in Quantico, Virginia, does contain PETN, which is a high explosive.

The suspect, identified as Umar Farouk Abdulmutallab, was tackled by passengers and apprehended, as seen in this picture carried by the New York Post. A U.S. official tells Fox the device was strapped to his leg or groin and a syringe is said to be part of the detonation mechanism.

A former senior homeland security official tells Fox the seat selection is suspicious. The suspect was in 19A over the fuel tanks, atop the wing and next to the skin of the aircraft. If there's an explosion, the official, who has not been briefed on the FBI case, said it could be accelerated by the fuel, damaging the wing and puncturing the skin, bringing down the plane.

An administration official confirmed the 23-year-old was put on a federal database in November, but there was not enough negative information about Abdulmutallab to place him on a no-fly list or a list that requires secondary screening.

Sources tell Fox federal investigators are now focusing on Yemen to determine the extent of the suspect's links to known extremists.


WALLACE: Catherine Herridge.

Catherine, thanks for that report.

Joining us are two lawmakers who have been briefed on the attempted terror attack. Joe Lieberman is chairman of the Senate Homeland Security Committee, and Michigan congressman Pete Hoekstra is the top Republican on the House Intelligence Committee.

Gentlemen, thanks so much for coming in.

Senator Lieberman, let me start with you. What's your latest information on Abdulmutallab? And what do we know about possible links to Al Qaeda? This morning, the head of homeland security, Janet Napolitano, says that they are a subject of interest in this investigation.

LIEBERMAN: Yeah. Look, I want to briefly set this in context, because we naturally focus on the specific attempted terrorist attack. We really did go to war with the Islamist extremists who attacked us on 9/11, and that war is not only occurring around the world.

This year the American homeland has been the target of an attempted terrorist attack more than a dozen times. We've thwarted most of those because of extraordinary work by our law enforcement, homeland security and intelligence forces.

But three — in three cases, there was a breakdown, we didn't stop it — first, the lone wolf who killed an Army recruiter in Little Rock in May; second, the Hasan case at Fort Hood; and now this one.

And let's be honest. This guy, Abdulmutallab, got through the screening, and this would have been — could have been an enormous disaster if not for our good fortune, a miracle on Christmas Day that this device did not explode.

What we know about this individual leads me to conclude that he was a self-radicalized person, that he reached out to Yemen. He broke ties with his family. We don't know for sure whether he contacted the radical sheik who's now in Yemen, Awlaki, but Awlaki has got to be a subject and a target of our interest.

WALLACE: Awlaki was the U.S. imam who went to Yemen and...


WALLACE: ... was in contact with the shooter at Fort Hood.

LIEBERMAN: That's right, contact with the shooter at Fort Hood and had contact with a couple of the people involved in attacking us on 9/11. So there are a lot of questions to ask.

To me, most significantly, what happened after this man's father called our embassy in Nigeria? What happened to that information? Did — was there follow up in any way to try to determine where this suspect was?

Secondly, it appears that he was recently put on a broad terrorism screening list, a database. Why wasn't that database activated? Why isn't it activated every time somebody gets on a plane abroad to come to the United States?

The only databases that are activated are — are the much smaller no- fly and selectee list, which are less than 20,000 names. We ought to — we ought to, in our age, be able to put 500,000 names on a computer and have everybody who's trying to come to the U.S. go through that list.

That doesn't mean they're convicted of any wrongdoing, but it would be basis enough to take this guy out of the line in Amsterdam and do a full body check, and that would have determined that he was carrying explosives.

WALLACE: Let me pick up on that with you, Congressman Hoekstra. We do know this man was put on a terror database, which includes about a half million people, after his father went — who was a very prominent banker in Nigeria — went to the U.S. embassy in Nigeria and reported him, said he was concerned about his extreme activities.

But he was allowed to keep his U.S. visa, and he was not on a no-fly list. Obviously, hindsight's 20/20, but should authorities have acted sooner, particularly given the fact that we're learning today that the British refused to give this man a visa to return to Great Britain, where he had been a student, in May?

HOEKSTRA: Well, I think as — as the senator said, as Joe said, we're going to have to go and take a look at exactly what happened to this information when our consulate — our embassy in Nigeria got the information.

You know, Joe and I worked for a long time on putting together, you know, the intel reform bill, where we broke down the barriers between the various agencies that would be tasked with screening these kinds of individuals and identifying the threats to the United States.

Was this a failure of these agencies to communicate, or were the markers that we put on this individual — were they not significant enough to bring this individual to a higher level of awareness that said, "OK, he needs to be put on a no-fly list?"

You know, this is a very difficult problem. We've seen the different faces of terrorism in the last three months — Hasan, the five Pakistanis — or the five individuals who went to Pakistan, and now this individual. It's a very hard problem.

We've got to keep improving our game plan each and every day, each and every week, to identify these new threats.

WALLACE: Let me follow up on that, Congressman, because you were quoted in the Detroit Free Press this morning as saying that, you know, the key is to connect the dots, and maybe the Obama administration will now realize that.

Is it really fair to hold the Obama administration responsible here?

HOEKSTRA: Yeah, I think it really is, because I think the connecting the dots is not necessarily on this particular case. It's connecting the dots that we've seen over the last 11 months, over the last eight years.

What do we have here? This is a international movement of radicalization. All right? The Obama administration came in and said, "We're not going to use the word 'terrorism' anymore. We're going to call is 'manmade disasters,'" trying to, you know, I think, downplay the threat from terrorism.

In reality, it's getting much more complex. Radicalization is alive. It is well. They want to attack the United States. That threat is here in the United States. It is lone wolf individuals. It is people that have become radicalized that have had some contact with Al Qaeda. And then it is the threat that come from Al Qaeda central.

Homegrown terrorism, the threat to the United States, is real. I think this administration has downplayed it. They need to recognize it, identify it. It is the only way we are going to defeat it.

WALLACE: Let me pick up on another issue with you, Senator Lieberman, security, safety on airliners. This fellow was able to get through security in Nigeria...


WALLACE: ... knew security in Amsterdam and got on this plane with this device, with a high explosive, as Catherine Herridge reported, PETN.


WALLACE: Does that mean that the terrorists are coming up with new weapons that can defeat our technology? And what do we do about it?

LIEBERMAN: Well, look. The reality is that Richard Reid had a similar device on him. It's now, what, eight years ago.

WALLACE: The famous shoe bomber.

LIEBERMAN: The shoe bomber. Secondly, a terrorist from Yemen went into Saudi Arabia in August of this year with this same explosive on him, blew himself up within a small distance from Prince Mohammed bin Nayef, who's their counterterrorism leader in Saudi Arabia, killed himself; fortunately, only slightly injured bin Nayef.

So this is something where I — you know, the 9/11 Commission said to us in its most searing statement, I think, 9/11 happened because of a failure of imagination. We could not imagine that people would do what they did to us on 9/11.

We've got to constantly be thinking like the terrorists here. You know, there's such a thing as a whole body scanning machine, contrary to just the magnetometer. We're using them in some places. They use them around the world in some places.

There have been privacy concerns expressed about the use of these whole body imaging devices, but I think those privacy concerns, which are, frankly, mild, have to fall in the face of the ability of these machines to detect material like this, explosive on this individual.

Just think about it. Three hundred people could have been killed and untold more on the ground in Michigan if this plane had crashed.

WALLACE: We've got about a minute left and I want to ask you both a quick question about Yemen.

This is not the first time that we have seen possible ties between Yemen and terrorism. We've got the U.S. with Obama attacking — air strikes in Yemen. On the other hand, the Obama administration sent six Guantanamo detainees back to Yemen.

Your thoughts about Yemen and what the U.S. role should be, attitude should be, towards that country?

HOEKSTRA: Yemen is a hot spot. We need to do everything we can to work with that government. We have about 90 Yemenis left in Gitmo. They should stay there. They should not go back to Yemen. If they go back to Yemen, we will very soon find them back on the battlefield going after Americans and other western interests.

WALLACE: And, Senator Lieberman, final 30 seconds?

LIEBERMAN: Well, I agree with Pete on this. I know the president made a promise that he'd close Guantanamo because of what it represented in world opinion.

But today it's a first-class facility. It's way above what's required by the Geneva Convention or our Constitution. It would be a mistake to send these 90 people back to Yemen, because based on the past of what's happened when we've released people from Guantanamo, a certain number of them have gone back into the fight against us.

Yemen now becomes one of the centers of that fight. I was in Yemen in August. And we have a growing presence there, and we have to, of Special Operations, Green Berets, intelligence. We're working well with the government of President Saleh there.

I leave you with this thought that somebody in our government said to me in the Sana'a, the capital of Yemen. Iraq was yesterday's war. Afghanistan is today's war. If we don't act preemptively, Yemen will be tomorrow's war. That's the danger we face.

WALLACE: Senate Lieberman, Congressman Hoekstra, we want to thank you both for coming in today and sharing the latest on this situation with us.

Content and Programming Copyright 2009 FOX News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2009 CQ Transcriptions, LLC, which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon FOX News Network, LLC'S and CQ Transcriptions, LLC's copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.