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Foreign Relations of the United States 1945-1950 Emergence of the Intelligence Establishment Department of State Washington, DC

Founding of the National Intelligence Structure
August 1945 through January 1946

                           

1. Memorandum From the Assistant to the Counselor (Doyle) to Secretary of State Byrnes

Washington, August 21, 1945.

//Source: National Archives and Records Administration, RG 59, Records of the Department of State, Decimal File 1945-49, 101.5/8-2145. Secret.

SUBJECT
Preliminary Survey of Legal Problems Involved in Establishing New Intelligence Agency

1. Future reliance upon the First War Powers Act to support an executive order transferring functions among agencies is probably illegal. Section 1 of Title I (the reorganization Title) contains the proviso: "That the authority by this Title granted shall be exercised only in matters relating to the conduct of the present war." It is difficult to see how any reorganization at this time could meet this requirement.

2. Even if this hurdle could be surmounted, a transfer which depended upon the First War Powers Act for validity would be short-lived. Title I is to remain in force during the war and "for six months after the termination of the war, or until such earlier time as the Congress by concurrent resolution or the President may designate." And upon termination of Title I, all agencies, departments and offices "shall exercise the same functions, duties, and powers as heretofore or as hereafter by law may be provided, any authorization of the President under this Title to the contrary notwithstanding."

3. OSS can be abolished by the President at any time. It was established by Presidential letter of July 11, 1941, under the name of the Office of the Coordinator of Information. On June 13, 1942, by Presidential Military Order it was renamed OSS and transferred to the jurisdiction of the Joint Chiefs.

4. If OSS were abolished, its functions would revert to the Joint Chiefs, or to the Army and Navy separately. The present functions of OSS are (a) to collect and analyze such strategic information as may be required by the Joint Chiefs, and (b) to plan and operate such special services as may be directed by the Joint Chiefs.

Recommendation: The proposed new intelligence agency, answerable to the Secretaries of State, War and Navy, should be created by executive order, based upon the Constitutional authority of the President as Chief Executive and Commander in Chief. No mention of the First War Powers Act should be made. The general theory underlying the order should be that State, War, and Navy all possess inherent and traditional authority to engage in intelligence operations, and that it is no usurpation of Congressional authority to amalgamate these functions in a single agency over which the three Departments will continue to exercise an equal measure of control.

 

2. Memorandum From E.R. Baker of the Bureau of the Budget Staff to the Assistant Director for Estimates (Martin)

Washington, August 24, 1945.

//Source: National Archives and Records Administration, RG 51, Records of the Office of Management and Budget, Series 39.19, OSS Organization and Functions, Box 67. No classification marking.

SUBJECT
Policy question with respect to Office of Strategic Services

Mr. Ramsey's attached memorandum points out what appears to be an ambiguity in instructions with respect to O.S.S./1/

/1/In the attached memorandum to Baker, August 23 (see the Supplement), G.E. Ramsey, Jr., referred to "The Post V-J Day Supplement to Report of Reconversion Program Committee," which recommended continuation of the OSS pending development of a permanent plan for foreign intelligence, except for "operational" activities which should be transferred to the War Department.

It seems to me that the Reconversion Committee's general directive is sound and that the examiners should use this as a guide in testing the details of the agency's proposed post V-J Day program. In doing this, however, and in attempting to reconcile any differences which may exist between the agency's submission and the examiner's point of view, the Bureau's policy will be evident to the agency and thus this action might be construed to be in conflict with the admonition printed at the top of the "Post V-J Day Supplement to Report of Reconversion Program Committee".

Mr. Ramsey has just shown me a copy of a memorandum of this date from Weldon Cooper to Hoelscher,/2/ stating that the Director met this morning with Judge Rosenman/3/ and Mr. Snyder/4/ and that they agree to constitute themselves as a reconversion committee to meet weekly and to move ahead in the disposal of war agency functions under the War Powers Act. It seems that this committee agreed on transferring the foreign information activities of OWI to the State Department and an Executive order to accomplish this is to be ready by Monday. Apparently as a result of the formulation of this committee, Dave Robinson and Stone have agreed that research and analysis of OSS should be transferred to the State Department and the Director has concurred in this conclusion. We are informed that an Executive order to accomplish this is to be ready by Monday, August 27. Presumably secret intelligence and counterintelligence activities would remain with OSS and that agency would continue to function, at least for the present, in this field as the agent of the Joint Chiefs of Staff. I have tried to get both Stone and Robinson by phone but find that they are both away; Dave will probably not be in until tomorrow and Stone will not be here until Monday. You may wish to speak to one of them with respect to this.

/2/Not found.

/3/Samuel I. Rosenman, Special Counsel to the President.

/4/John W. Snyder, Director of the Office of War Mobilization an Reconversion.4

 

3. Memorandum From the Director of the Office of Strategic Services (Donovan) to President Truman

Washington, August 25, 1945.

//Source: Truman Library, Miscellaneous Material Filed by the Administrative Asst. in the President's Office, Office of Strategic Services. Secret.

I enclose copy of letter I have sent to the Director of the Budget, advising him that the liquidation of OSS should be complete about January 1, 1946, and pointing out the necessity of designating an agency to take over its functions and its assets.

Also, I enclose a Statement of Principles which I believe should govern the establishment of a central intelligence agency.

This matter you have stated you wished to explore with me before coming to a decision. I hope you may find time to discuss it before I leave for Germany on the War Crimes Case within the next two weeks.

Donovan

Attachment 1

Letter From the Director of the Office of Strategic Services (Donovan) to the Director of the Bureau of the Budget (Smith)

Washington, August 25, 1945.

MY DEAR MR. SMITH: In answer to your communication of August 23, 1945/1/ in reference to further reduction of personnel, we are working under what is in effect a liquidation budget. Within its provisions we have taken steps to terminate many of our operational (as distinct from intelligence) activities and to reduce the remaining parts to a size consistent with present obligations in the Far East, in the occupation of Germany and Austria, and in the maintenance of missions in the Middle East and on the Asiatic and European continents.

/1/Not found. There is an August 25 letter on the same subject. (Central Intelligence Agency Historical Files, HS/HC-801, Item 27) See the Supplement.

As our liquidation proceeds it will become increasingly difficult to exercise our functions so that we have found it necessary to set up a liquidating committee with procedures and controls to provide for the gradual elimination of our services in step with the orderly reduction of personnel./2/

/2/See also the letter from Donovan to Smith, August 29, in the Supplement. (National Archives and Records Administration, RG 51, Records of the Office of Management and Budget, Series 39.19, OSS Organization and Function)

It is our estimate, however, with the strictest economy of manpower and of funds the effectiveness of OSS as a War Agency will end as of January 1, or at the latest February 1, 1946, at which time liquidation should be completed. At that point I wish to return to private life. Therefore, in considering the disposition to be made of the assets created by OSS, I speak as a private citizen concerned with the future of his country.

In our Government today there is no permanent agency to take over the functions which OSS will have then ceased to perform. These functions while carried on as incident to the war are in reality essential in the effective discharge by this nation of its responsibilities in the organization and maintenance of the peace.

Since last November, I have pointed out the immediate necessity of setting up such an agency to take over the valuable assets created by OSS. Among these assets was the establishment for the first time in our nation's history of a foreign secret intelligence service which reported information as seen through American eyes. As an integral and inseparable part of this service there is a group of specialists to analyze and evaluate the material for presentation to those who determine national policy.

It is not easy to set up a modern intelligence system. It is more difficult to do so in time of peace than in time of war.

It is important therefore that it be done before the War Agency has disappeared so that profit may be made of its experience and "know how" in deciding how the new agency may best be conducted.

I have already submitted a plan for the establishment of a centralized system./3/ However, the discussion of that proposal indicated the need of an agreement upon certain fundamental principles before a detailed plan is formulated. If those concerned could agree upon the principles within which such a system should be established, acceptance of a common plan would be more easily achieved.

/3/Apparent reference to Donovan's memorandum to Roosevelt, November 18, 1944 ("The Donovan Plan"), printed in Troy, Donovan and the CIA, pp. 445-447.

Accordingly, I attach a statement of principles, the soundness of which I believe has been established by study and by practical experience.

Sincerely,

William J. Donovan

Attachment 2

Paper by the Director of the Office of Strategic Services (Donovan)

Principles--The Soundness Of Which It Is Believed Has Been Established By Our Own Experience And A First-Hand Study Of The Systems Of Other Nations--Which Should Govern The Establishment Of A Centralized United States Foreign Intelligence System.

The formulation of national policy both in its political and military aspects is influenced and determined by knowledge (or ignorance) of the aims, capabilities, intentions and policies of other nations.

All major powers except the United States have had for a long time past permanent worldwide intelligence services, reporting directly to the highest echelons of their Governments. Prior to the present war, the United States had no foreign secret intelligence service. It never has had and does not now have a coordinated intelligence system.

The defects and dangers of this situation have been generally recognized. Adherence to the following would remedy this defect in peace as well as war so that American policy could be based upon information obtained through its own sources on foreign intentions, capabilities and developments as seen and interpreted by Americans.

1. That each Department of Government should have its own intelligence bureau for the collection and processing of such informational material as it finds necessary in the actual performance of its functions and duties. Such a bureau should be under the sole control of the Department head and should not be encroached upon or impaired by the functions granted any other Governmental intelligence agency. Because secret intelligence covers all fields and because of possible embarrassment, no executive department should be permitted to engage in secret intelligence but in a proper case call upon the central agency for service.

2. That in addition to the intelligence unit for each Department there should be established a national centralized foreign intelligence agency which should have the authority:

A. To serve all Departments of the Government.

B. To procure and obtain political, economic, psychological, sociological, military and other information which may bear upon the national interest and which has been collected by the different Governmental Departments or agencies.

C. To collect when necessary supplemental information either at its own instance or at the request of any Governmental Department by open or secret means from other and various sources.

D. To integrate, analyze, process and disseminate, to authorized Governmental agencies and officials, intelligence in the form of strategic interpretive studies.

3. That such an agency should be prohibited from carrying on clandestine activities within the United States and should be forbidden the exercise of any police functions either at home or abroad.

4. That since the nature of its work requires it to have status it should be independent of any Department of the Government (since it is obliged to serve all and must be free of the natural bias of an operating Department). It should be under a Director, appointed by the President, and be administered under Presidential direction, or in the event of a General Manager being appointed, should be established in the Executive Office of the President, under his direction.

5. That subject to the approval of the President or the General Manager, the policy of such a service should be determined by the Director with the advice and assistance of a Board on which the Secretaries of State, War, Navy and Treasury should be represented.

6. That this agency, as the sole agency for secret intelligence, should be authorized, in the foreign field only, to carry on services such as espionage, counter-espionage and those special operations (including morale and psychological) designed to anticipate and counter any attempted penetration and subversion of our national security by enemy action.

7. That such a service should have an independent budget granted directly by the Congress.

8. That it should be authorized to have its own system of codes and should be furnished facilities by Departments of Government proper and necessary for the performance of its duties.

9. That such a service should include in its staff specialists (within Governmental Departments, civil and military, and in private life) professionally trained in analysis of information and possessing a high degree of linguistic, regional or functional competence, to analyze, coordinate and evaluate incoming information, to make special intelligence reports, and to provide guidance for the collecting branches of the agency.

10. That in time of war or unlimited national emergency, all programs of such agency in areas of actual and projected military operations shall be coordinated with military plans, and shall be subject to the approval of the Joint Chiefs of Staff, or if there be a consolidation of the armed services, under the supreme commander. Parts of such programs which are to be executed in the theater of military operations shall be subject to control of the military commander.

4. Memorandum From the Assistant Director for Administrative Management of the Bureau of the Budget (Stone) to the Director of the Bureau of the Budget (Smith)

Washington, August 27, 1945.

//Source: National Archives and Records Administration, RG 51, Records of the Office of Management and Budget, Series 39.19, OSS Organization and Functions. No classification marking.

SUBJECT
Termination of the Office of Strategic Services and the Transfer of its Activities to the State and War Departments

This memorandum is for your use in discussing with Judge Rosenman and Mr. Snyder the question of the disposition of OSS and its activities.

The Problem

OSS was established by Military Order of June 13, 1942,/1/ and was placed under the "jurisdiction" of the Joint Chiefs of Staff. Under the terms of this Order, OSS was directed to:

/1/See Troy, Donovan and the CIA, p. 427.

a. Collect and analyze such strategic information as may be required by the United States Joint Chiefs of Staff.

b. Plan and operate such special services as may be directed by the United States Joint Chiefs of Staff.

With the close of the war, the question arises as to the disposition of OSS as an agency and the continuation or termination of its activities.

Discussion

During the war OSS has engaged in two broad kinds of activities: (1) the production of intelligence, represented chiefly by the Research and Analysis Branch; and (2) activities of an operational nature known within OSS as Strategic Service Operation.

If our previous recommendation to the State Department for the establishment of an Office of Research and Intelligence is accepted, that Department will require a considerable group of trained analysts in the field of economic, political, and geographic intelligence. By general agreement, the Research and Analysis Branch of OSS has performed very creditably in these intelligence fields during the war and its personnel is available for transfer to the State Department. There is the advantage also of obtaining for State a going concern which can continue its work with a minimum of interruption and confusion. In fact, R&A has done a considerable amount of work for State during the war and many informal relationships now exist.

It is generally admitted that State lacks proper presentation facilities. This condition will be further aggravated if R&A should be transferred to State to become a part of its Office of Research and Intelligence. It seems to us that Presentation should also be transferred to State.

The remaining activities are not easily described but with a few exceptions are of a nature that will not be needed in peacetime. The main problems are the presentation of the records and experience gained, the completion of some of the OSS assignments overseas, and the orderly liquidation of its overseas activities. Problems also will arise with respect to the return and reassignment or separation of the civilian and military personnel involved. The War Department seems the proper agency to take care of this job. (This does not resolve the recent intelligence problem which requires further review.)/2/

/2/This parenthetical sentence was added by hand, apparently Stone's.

Action Recommended

1. That you present a proposal to the Committee/3/ to transfer the Research and Analysis and Presentation Branches to the State Department and the remaining OSS activities to the War Department for salvage and liquidation. A tentative draft order for this purpose is attached./4/ This order is not in final form and should be used for discussion purposes only.

/3/A "Reconversion Committee" consisting of John W. Snyder, Samuel I. Rosenman, and Harold Smith undertook the disposal of war agency functions. Bureau of the Budget officials, with Smith's concurrence, had agreed that the research and analysis function of OSS should be transferred to the Department of State. See Document 3.

/4/See the Supplement.

2. If the decision of the Committee is favorable, clearances should be made with Acheson in State and McCloy in War as the receivers of the transferred activities. We are prepared to submit to State the necessary documents in the form of a draft departmental order and directives which will facilitate the reception of the transferred activities.

3. Prior to the issuance of the Order, clearances should be made with the Joint Chiefs of Staff and the Navy as interested parties.

D.C.S./5/

/5/Printed from a copy that bears these typed initials.

 

5. Memorandum From the Director of the Federal Bureau of Investigation (Hoover) to Attorney General Clark

Washington, August 29, 1945.

//Source: National Archives and Records Administration, RG 263, Records of the Central Intelligence Agency, Troy Papers, FBI Documents. Personal and Strictly Confidential. Drafted by Tamm.

Apropos of our conversation yesterday,/1/ I am attaching hereto a suggested draft of a letter to the Secretary of State relating to the matter of continuing the Special Intelligence Service operated by the Federal Bureau of Investigation in the Western Hemisphere./2/ In addition, however, there have been certain developments in this situation in the last twenty-four hours, about which I wanted to advise you.

/1/No other record of this conversation has been found.

/2/Not found.

I have ascertained that General William Donovan has recently seen President Truman and is writing him a letter/3/ with reference to a proposed program for the operation of a World-wide Intelligence Service. It is reasonable to assume, I believe, that the plan which General Donovan will advance to the President will be similar to the one which he has heretofore advocated and about which I have advised you in detail.

/3/See Document 3.

From outside sources I have learned that Colonel Frank McCarthy, new Assistant Secretary of State, has discussed the FBI's operation of the Western Hemisphere Intelligence Service with Secretary of State Byrnes. From the statements made by Mr. Byrnes to Colonel McCarthy, it appears obvious that the Secretary of State is not adequately or fully informed as to the nature, scope or effectiveness of the Bureau's operations in this field.

Collaterally, I have received information that the State Department is engaged in the establishment of an intelligence organization to be operated by and entirely within the State Department's control but on a world-wide basis. Apparently the planning of this program has reached an advanced stage.

I think, consequently, in view of these additional developments, that time is of the very essence in reaching a decision as to the future of the SIS program. As I have told you previously, I am not seeking for the Federal Bureau of Investigation the responsibility for world-wide intelligence system. I am firmly convinced, however, in light of our experiences during and even before the current world war, that the future welfare of the United States necessitates and demands the operation of an efficient, world-wide intelligence service. It is a fact, as you well know, that the SIS program operated by the Bureau in the Western Hemisphere has been completely successful. The program has produced results which were beyond our hope and expectations when we went into this field and these results were brought about without the slightest friction in the countries where we operated. Not a single incident has arisen in which the Government of the United States was subject to any unfavorable or unfortunate publicity. I think this is a rather remarkable achievement when you consider the fact that hundreds of agents operated both undercover and as open representatives of the Government of the United States throughout the Western Hemisphere, conducting thousands of investigations resulting in the acquisition, assimilation and distribution of great quantities of intelligence information. It seems to me, therefore, that taking for granted the recognition of the need for a world-wide intelligence service, it is most logical that the system which has worked so successfully in the Western Hemisphere should be extended to a world-wide coverage. As I have advised you in previous memoranda, such a step can be accomplished without the necessity for any legislative enactment creating operating agencies or empowering them to act. The Federal Bureau of Investigation and the Military and Naval Intelligence have ample Authority under the present operating statutes to extend the Western Hemisphere coverage to a world-wide organization. This, of course, negatives the necessity for seeking through legislative channels earmarked or otherwise readily identifiable funds for the carrying on of these operations. If, on the other hand, the General Donovan plan or even the plan presently under consideration by the State Department is accepted, it will be necessary to seek Congressional authority for the program and to obtain funds which will be earmarked for and otherwise identified as being for the operation of an international espionage organization. The resulting publicity from such a step will, of course, materially curtail the effectiveness of the proposed program. Such publicity will serve to notify other nations of the program proposed to be carried out by the United States, but other nations will not similarly publicize their own intelligence operations, to the point where the United States will be in a position of advertising its intelligence organization while other nations will operate on a most secretive basis. As a matter of fact, it is well known that the British and Russian Governments, while ostensibly discontinuing their intelligence services or even denying the existence of such organizations in individual countries, are actually intensifying their coverage.

I feel very strongly that there is a need for the establishment and operation of a world-wide intelligence service. While I do not seek this responsibility for the Federal Bureau of Investigation, I do believe that upon the basis of our experience of the last five years we are well qualified to operate such a service in conjunction with parallel operations of the Military and Naval Intelligence upon the same general basis as these operations have been carried on in the Western Hemisphere. I think that time is of the essence in reaching a decision upon this matter and, consequently, I urge that you personally take the matter up with Secretary of State Byrnes as soon as possible.

Respectfully,

John Edgar Hoover/4/

/4/Printed from a copy that bears this typed signature.

 

6. Letter From the Director of the Office of Strategic Services (Donovan) to the President's Special Counsel (Rosenman)

Washington, September 4, 1945.

//Source: Central Intelligence Agency Historical Files, HS/HC 801, Item 29. No classification marking.

DEAR SAM: I am enclosing a copy of my letter to the Bureau of the Budget concerning the liquidation of the Office of Strategic Services./1/

/1/See Attachment 1 to Document 3.

Since the above meeting with the Budget Bureau, I have submitted a liquidation budget for presentation to the Congress.

I understand that there has been talk of attempting to allocate different segments of the organization to different departments. This would be an absurd and unsatisfactory thing to do. The organization was set up as an entity, every function supporting and supplementing the other.

It's time for us to grow up, Sam, and realize that the new responsibil-ities we have assumed require an adequate intelligence system.

Increasingly the President will see the need and I hope a new agency will be set up to take over a very useful legacy.

Sincerely,

William J. Donovan/2/

/2/Printed from a copy that bears this typed signature.

 

7. Memorandum From the Director's Assistant (Tamm) to the Director of the Federal Bureau of Investigation (Hoover)

Washington, September 6, 1945.

//Source: National Archives and Records Administration, RG 263, Records of the Central Intelligence Agency, Troy Papers, FBI Documents. No classification marking.

Pursuant to an appointment made through Bob Lynch, Mr. Lynch and I held a one-hour conference with Colonel Frank McCarthy, Assist-ant Secretary of State, on Wednesday morning, September 5th.

Colonel McCarthy was informed that you had instructed me to call upon him for the purpose of determining what the State Department position is with reference to the continuation of the SIS Service since you will shortly have to appear before the Appropriation Committee, and the Bureau of the Budget and the Appropriation Committee have indicated a desire to be informed as to the future course of operation which you contemplate for SIS. I pointed out to Colonel McCarthy that SIS was a service agency for the State Department and that your program or its future would depend entirely and completely upon what the Department of State desired done with this Unit. I traced the background of the organization of the SIS, pointing out that it was set up upon Presidential instruction issued by Mr. Roosevelt to Mr. Berle, outlined the functions of the Bureau, the establishment of the Legal Attaches, training and operation of undercover personnel, the Bureau's radio stations, the daily conference with the Military and Naval Attaches and a representative of the Ambassador, the distribution of the information in Washington to the State Department and all other aspects of the SIS operation in as brief and specific form as was possible.

It was rather difficult to make a comprehensive statement to Colonel McCarthy because of his constant interruptions with questions as to what the Bureau thought of a "one-man" intelligence set-up reporting directly to the President, and similar questions which indicated that Colonel McCarthy was thoroughly familiar with the General Donovan plan. I outlined in detail to McCarthy the objections to the so-called "one-man" anonymous director of intelligence, pointing out that such an organization would be labeled as a Gestapo, that the President could not directly supervise such an organization, that such an organization would, despite the descriptive term "one-man" require a large administrative setup some place in Washington, which would become readily known, subject it to criticism, publicity, etc. McCarthy was argumentative about this point indicating that while the identity of the group could be known, just as the identity of OSS was known, no information need come out about what it was doing. I pointed out that under the restrictions of censorship and wartime necessity this might be true in wartime, but that it would never be true in peacetime and that such a group would be the target for Congressional criticism, hostile press representatives, etc. I pointed out that such an organization would be essentially a political one and that the effectiveness of the organization would be materially decreased by the probable turnover in the personnel following a change in administration. McCarthy stated that the OSS had done a most effective job in the occupied countries and that he had personal knowledge of this. I stated that I had no doubt but that OSS contained some capable, conscientious and sincere individuals but that it was one thing to operate on a touch and go basis during wartime feverish activity and quite another to operate on a long-term basis a world-wide intelligence service. I pointed out that such a service could be successful only in professional hands and that the success of the SIS operation was attested to by its accomplishments in the Latin American fields in the past five years. I told Colonel McCarthy that probably the best source of accurate information concerning the SIS operations would be the Ambassadors, such as Spurille Braden, Norweb and others, even including Messersmith, who had first-hand knowledge of the SIS operation.

I made it clear to Colonel McCarthy that you were not seeking the SIS operations for the Bureau but that you felt a world-wide intelligence service was an absolute necessity, that such a service should be in professional hands and that it should not operate on any basis of a divided jurisdiction upon a hemispheric basis. McCarthy stated that he thought the OSS organization could quite readily be amalgamated into a White House establishment in which the President would receive reports direct from its director. I pointed out that this was the so-called British system which had proved so basically unsuccessful that while the British Secret Service were basking in the self-generated light of their own brilliance, the German Intelligence Service was dispatching agents and saboteurs to the Western Hemisphere on a wholesale basis and that these agents were arriving without the knowledge or even suspicion of the much-touted British Intelligence Service. McCarthy indicated that his reports as to the efficiency of the British Intelligence Service were at considerable variance with the analysis which I made of the British Intelligence Serv-ice. I told him that probably the source of his information about British Intelligence had something to sell and that most certainly the Bureau was not trying to sell anything.

In the interest of brevity I am not setting forth all of the details of my conversation with McCarthy, although I covered the field of advantages of SIS operations, its success, etc. in detail and pointed out the objections not alone to the so-called "one-man" intelligence service but also the first General Donovan plan and the Army plan. The advantages of an extension of the SIS operations to a world-wide basis with the collaboration of Military and Naval Intelligence were pointed out, including the lack of necessity of securing enabling legislation, the fact that no appropriation would have to be specifically identified or ear-marked and the other advantages which we have heretofore discussed. I think, frankly, that the logic of our position ultimately crashed through any prejudices or previously conceived ideas which McCarthy had because after almost an hour of discussion, he stated that the Bureau's presentation of the advantages and disadvantages of the various proposals opened up to him a new concept of the problem and new avenues of approach which had not theretofore occurred to him.

Colonel McCarthy stated that he had reviewed recently a memorandum on the SIS operations/1/ which Mr. Clark had given to Mr. Byrnes and that he had referred this memorandum to the State Department specialist in intelligence matters, Mr. Fred Lyon, for review and recommendation as to the position which the State Department should take in this situation. McCarthy stated that he would be largely influenced by the position which Fred Lyon would take upon the various proposals and that he probably would, upon the basis of Lyon's experience in the State Department, see eye to eye with him. He stated that he was most anxious, therefore, to have me go over the entire picture with Fred Lyon in order that Fred Lyon might have the advantage of the Bureau's viewpoint before he submitted his, Lyon's, statement as to the position which the State Department should take. McCarthy indicated that he would probably support Lyon in his major premises in attempting to reach a decision from Byrnes as to the program to be followed. I told Colonel McCarthy that the Bureau's experience and dealings with Lyon had been always on a satisfactory basis and that I would in accord with his suggestion be glad to talk to Fred Lyon. McCarthy stated that upon the basis of the statements and explanations which I made to him it was possible that the views of the State Department and the FBI might not be so divergent but that they might be readily reconciled and a completely satisfactory program worked out.

/1/Reference may be to a copy of a paper entitled "Accomplishments of the Special Intelligence Service," September 3, attached to a memorandum from Tamm to Hoover of the same date. (Ibid.) See the Supplement.

You will recall that Lyon was out of his office when I attempted to see him, but he called at my office at five o'clock last evening. I outlined exactly what had transpired, as set forth above, to Fred Lyon, pointing out to him that I was discussing the matter with him in accord with Colonel McCarthy's request. At one point in my discussion with Lyon I told him that I had advised Colonel McCarthy of the establishment and operation of the Bureau's radio stations "with or without the knowledge and consent of the various Latin American Governments" since in an intelligence organization there was a need for a channel of fast secret communication. I told Lyon that I pointed out that on two occasions, namely in Ecuador and Paraguay, during revolutions the Bureau's radio system had been the only channel of communication between the Embassy and the State Department in Washington. Lyon expressed considerable surprise that I had told McCarthy of this and stated that in a discussion on Wednesday afternoon (subsequent to my discussion with McCarthy) he, Lyon, had told McCarthy of this radio network of the Bureau's and McCarthy expressed considerable surprise, indicating that he did not know the Bureau operated such a radio system.

Fred Lyon stated further that he was very much surprised and a little confused as to McCarthy suggesting to me that I discuss this situation with Lyon prior to Lyon submitting his recommendations to McCarthy because Lyon had prepared a memorandum containing his views, which as you know were parallel to the Bureau's views, and submitted it to McCarthy on Tuesday evening, September 4th,/2/ that is, the afternoon before I talked to McCarthy. Lyon stated that he understood that McCarthy had on Tuesday evening relayed this memorandum on to Secretary of State Byrnes prior to Byrnes' departure for London. Lyon of course did not know whether McCarthy had submitted to Byrnes anything in addition to Lyon's memorandum or whether he had expressed his own views as being in accord with or contrary to his views.

/2/Not found.

Fred Lyon further advised that on Wednesday afternoon McCarthy had sent for him, had referred to the fact that I had talked to McCarthy and stated that since Lyon was "pro-FBI", McCarthy wondered whether Lyon would be willing to testify in favor of the Bureau's appropriation. Lyon stated that he did not think it was necessary for anyone other than Bureau representatives to testify for the Bureau's appropriation, pointing out that all that was normally necessary was for the State Department to indicate to the Bureau of the Budget that the State Department approved in general terms the nature and extent of the Bureau's operations outside the United States. McCarthy indicated to Lyon, however, that it might be necessary for Lyon to testify with reference to the Bureau's appropriation. Fred Lyon indicated that he would keep us advised of any additional developments in this matter.

 

8. Memorandum From the Director of the Federal Bureau of Investigation (Hoover) to Attorney General Clark

Washington, September 6, 1945.

//Source: National Archives and Records Administration, RG 263, Records of the Central Intelligence Agency, Troy Papers, FBI Documents. Personal and Strictly Confidential. Drafted by Tamm.

I have received information today from two independent outside sources relating to General William Donovan's plans for the perpetration [perpetuation] of his dynasty within the Office of Strategic Services by the continuation of his agency under another name in the world-wide intelligence field, which I thought would be of interest to you. These sources advise that General Donovan has already selected his candidate to head up the new organization and that his selection is Brigadier General John Magruder. Another and independent source has quoted Donovan as stating that he has submitted John Magruder's name to Bob Hannegan to head up the new world-wide intelligence organization and that Hannegan has approved Magruder for this post.

John Magruder is an Army officer who during the course of his Army service was at one time chief of the intelligence branch of the War Department General Staff, was Assistant Military Attaché in China and was Chief of a Military mission to China in 1942. In addition, Magruder served in the Philippine Islands and was Military Attaché in Bern, Switzerland. Magruder has served for some time under General Donovan as Deputy Director of the Office of Strategic Services.

John Magruder married Helen Schurman, who is the daughter of Jacob Gould Schurman, who has held various diplomatic posts, including the post of Ambassador to China, Ambassador to Germany and various other positions intimately associated with the State Department. In addition, my sources state that Mrs. John Magruder is reported to be the niece of Jacob L. Crane, deceased, who held various posts within the State Department. General Donovan's selection of John Magruder, I have been advised, was prompted in some degree by the good will and support which are attached to Magruder by a certain clique in the State Department because of their pleasant relationships with Mrs. Magruder's father and her uncle. This clique consequently is reported to be strongly supporting John Magruder for the new post as head of the World-wide Intelligence Service.

General Donovan's selection of John Magruder and the reported approval of his selection by Bob Hannegan is another of Donovan's deadly died-in-the-wool secrets which appear, however, to be matters of general knowledge. Two independent sources have advised me today that Brigadier General John Magruder has confided in certain persons that he has been selected for the post of head of the intelligence service and he has allegedly even gone to the extent of advising a large business enterprise with foreign holdings and international interests that he would "look out for their interests" in the foreign field when he takes over his new post of duty.

Although, as I have indicated, this information is allegedly very, very confidential, I have every reason to assume from the source from which I received it that ultimately this information will appear in the press.

Respectfully,

John Edgar Hoover/1/

/1/Printed from a copy that bears this typed signature.

 

9. Memorandum From the Director of the Office of Strategic Services (Donovan) to President Truman

Washington, September 13, 1945.

//Source: Truman Library, Miscellaneous Material Filed by the Administrative Asst. in the President's Office, Office of Strategic Services. No classification marking. Donovan saw the President on September 13, but only for a brief ceremonial occasion. (Ibid., President's Appointment Book, File of Matthew Connelly) Also reproduced in CIA Cold War Records: The CIA under Harry Truman, p. 3.

1. I understand that it has been, or will be, suggested to you that certain of the primary functions of this organization, more particularly, secret intelligence, counter-espionage, and the evaluation and synthesis of intelligence--that these functions be severed and transferred to separate agencies. I hope that in the national interest, and in your own interest as the Chief Executive, that you will not permit this to be done.

2. Whatever agency has the duty of intelligence should have it as a complete whole. To do otherwise would be to add chaos to existing confusion in the intelligence field. The various functions that have been integrated are the essential functions in intelligence. One is dependent upon the other./1/

Donovan

/1/According to Harold Smith's diary, he told Truman on September 13 that Donovan "was storming about our proposal to divide his intelligence service." Truman told Smith that he had in mind a "broad intelligence service attached to the President's Office," and that the Bureau of the Budget should recommend "dissolution of Donovan's outfit even if Donovan did not like it." Smith agreed with Truman's view but stated that he had wanted to check with the President before the Bureau of the Budget went ahead with its work. (Roosevelt Library, Papers of Harold Smith, Box No. 4, Conferences with President Truman, September 13, 1945) See the Supplement.

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