NEW YORK - President Barack Obama and Iranian leader Mahmoud Ahmadinejad traded heated remarks Friday on the emotional subject of the Sept. 11 terrorist attacks, and hopes for a quick resumption of talks on Iran's suspect nuclear program appeared to fade.

Obama accused Ahmadinejad of making "offensive" and "hateful" comments when he said most of the world thinks the United States was behind the attacks to benefit Israel. The Iranian president defended his remarks from a day earlier at the United Nations General Assembly and suggested that a fact-finding panel be created by the U.N. to look into who was behind them.

"It was offensive," Obama said in an interview with the Persian service of the BBC that was to be broadcast to the Iranian people. "It was hateful."

"And particularly for him to make the statement here in Manhattan, just a little north of ground zero, where families lost their loved ones, people of all faiths, all ethnicities who see this as the seminal tragedy of this generation, for him to make a statement like that was inexcusable," Obama said.

Obama said Ahmadinejad's remarks will make the American people even more wary about dealing with his government.

"For Ahmadinejad to come to somebody else's country and then to suggest somehow that the worst tragedy that's been experienced here, an attack that killed 3,000 people, was somehow the responsibility of the government of that country, is something that defies not just common sense but basic sense - basic senses of decency that aren't unique to any particular country - they're common to the entire world," he said

In a news conference at a Manhattan hotel, Ahmadinejad shot back, saying he had not made any judgments about who was responsible for 9/11 and lashed out at the U.S. wars in Iraq and Afghanistan as an overreaction to the attacks.

"I did not pass judgment, but don't you feel that the time has come to have a fact finding committee," he said of his General Assembly address that prompted the U.S. delegation to walk out of the session along with those from all 27 European Union nations, Australia, New Zealand, Canada and Costa Rica.

America should "not occupy the entire Middle East ... bomb wedding parties ... annihilate an entire village just because one terrorist is hiding there," Ahmadinejad said.