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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

                           

35. Memorandum From the Assistant Director for Administrative Management, Bureau of the Budget (Stone) to the Assistant Director, Bureau of the Budget (Appleby)

Washington, October 26, 1945.

//Source: National Archives and Records Administration, RG 51, Records of the Office of Management and Budget, Director's Files, Series 39.27, Intelligence. Confidential.

SUBJECT
Comments on Proposal "U.S. Secret World-Wide Intelligence Coverage"/1/

/1/Document 17.

Attached is a draft of a reply from you to Tom Clark covering his plan for a new intelligence setup./2/ The plan is analyzed below./3/ This memorandum does not comment upon the question as to whether this country will or will not engage in any clandestine intelligence operations. Also, comment is limited to the proposal as presented. This is more difficult to do than if the plan had been presented in more detail. Other than stating that the plan is similar to that in operation in South America and supplying a chart, the document only contains three paragraphs outlining the plan itself. These three paragraphs provide for a joint operation in every country of the world without stating how joint operation is to be achieved; for a top group to determine basic policy, and for an operational committee, without stating either what basic policy is or what the operational committee would do; and provides a unit for evaluation of material supplied by the three agencies. (Later a reference is made to one agency.)

/2/The draft is not printed. For the reply as sent, see Document 37.

/3/This and the preceding sentence are handwritten on the source text.

Certain elements of the proposal and of the arguments in support of it appear to have validity.

1. There is a need for a "legal" (or perhaps it would be better referred to as "security") attaché. I have previously commented on this in a memorandum of September 19, a copy of which is attached./4/

/4/Document 11.

2. Geographic concepts as a basis for delimiting the operations of several agencies in the security intelligence field are not valid.

3. "Police" functions and the collection of a limited kind of intelligence relating to the police function can be combined.

The weaknesses of the proposal as presented are largely those of omission.

1. In using the South American experience as the basis for planning a world-wide system the proposal fails to consider the vast difference between the two situations. In South America, our operations were not directed primarily at the countries in which they were conducted. Our operation there was not secret in the sense that it would have to be in the big league. It was aided greatly by Hemisphere defense agreements. Most of the countries were at war as allies. A whole series of actions resulting from our intelligence was possible by agreement (the interning of alien suspects, the Proclaimed List, cooperation of the countries involved in shutting down radios, effecting travel control, etc.). Even under these most favorable conditions, the operation in South America could not be characterized without reserve, as it is in the document, by such phrases as secret, economical, efficient, proved effectiveness, no elaborate superstructure, simplicity of structure, flexibility of operations, assured secrecy, no embarrassment.

2. The plan seems to contemplate the centering under the legal attache of all undercover agents and liaison with other intelligence agencies. It also apparently envisions no other secret intelligence operation in the Government. The memorandum clearly indicates the limited view of intelligence from which this springs. Security intelligence properly done requires the use of some secret activity. To center all secret intelligence, however, in the security agency would be to inhibit the development of any really basic intelligence and would probably find us in any future emergency again, as at Pearl Harbor, on alert no. 1 (i.e., against sabotage). Daily conferences with the Ambassador under this system would tend to enshroud him in a picture of "threats to democracy" and "intrigue" that would warp his over-all view.

3. The same objection arises from centering coordination in the security agency. The proposal simply adds an Assistant Secretary of State to the present Interdepartmental Intelligence Committee, calls it an Operational Committee, and apparently relies on it for coordination./5/ The present IIC has been a device for securing cooperation in triplication rather for attaining any coordination. Such a committee, working only under basic policy and relying principally on daily meetings in the Embassy, is not an adequate coordinating mechanism. Delimitation by dictionary, i.e., "legal," "military," "naval" will not work. Coordination can only be achieved by the central preparation of detailed operating plans. Coordinating authority should be centered in the interdepartmental committee which the President on September 20 directed Secretary Byrnes to set up. If the current thinking of key persons in this field is any guide to the possible decision of the interdepartmental committee, secret intelligence will not be centered in any one department but will be conducted primarily centrally or under strong central direction. The Justice proposal actually would permit FBI to have all responsibility for secret intelligence under only the mildest kind of direction.

/5/A Presidential directive of June 26, 1939, instructed the FBI and Army and Navy Intelligence to coordinate their investigations of espionage and sabotage cases and ordered the heads of the three services to act as a coordinating group. A Department of State representative participated informally. For details, see Troy, Donovan and the CIA, pp. 12-14, 16-21, and 46-51.

Attached is a suggested reply to Mr. Clark. Both this memorandum and the reply to Mr. Clark have been cleared informally with Colonel McCormack, Special Assistant to the Secretary of State for Research and Intelligence.

Stone

36. Memorandum From the Assistant Chief of Staff, Operations Division, Department of War (Hull) to the Assistant Secretary of War for Air (Lovett)

Washington, October 28, 1945.

//Source: National Archives and Records Administration, RG 263, Records of the Central Intelligence Agency, Troy Papers, Box 10, Folder 73. Top Secret.

SUBJECT
Report on Intelligence Matters

The following report is submitted as requested in your memorandum dated 23 October 1945, subject as above./1/ Headings of paragraphs below correspond to those in your memorandum. Since OPD is not an intelligence agency, no answers are submitted to questions in paragraphs a, c and e, Part I and d, Part II.

/1/Document 32.

Part I

b. The following relations existed between OPD and the indicated intelligence agencies during the period of the war:

(1) G-2

(a) OPD in collaboration with G-2, maintained current estimate of the situation for use in connection with the preparation of over-all strategic and operational plans.

(b) OPD reviewed and coordinated all intelligence matters under consideration by JCS or CCS.

(2) OSS

(a) OSS activities in theaters were under theater commanders, who in turn were under OPD in the latter's capacity as command post for the Chief of Staff.

(b) OSS functioned under general policies and directives issued by JCS, OPD having reviewed and coordinated all JCS matters within the War Department.

d. It is believed that in time of peace the military attaché system serves a definite purpose in obtaining certain military information limited to that which foreign governments are willing to part with, or that which is obtainable without arousing the suspicion of such foreign governments. However, this system both in time of peace and particularly in time of war is unable to obtain vital military information and vital economic, political and scientific intelligence both of which are essential in determining capabilities and intentions of foreign governments. On the other hand, it is believed that OSS in certain of its fields contributed considerably to the war effort. Its work in connection with resistance movements and research and analysis were of inestimable value. Its sabotage, intelligence and counter-intelligence activities were of considerable value. It is felt that there was unfortunate rivalry and duplication of effort between G-2 and OSS during the war. It is believed that a well organized and thoroughly integrated national intelligence system in peace would have considerably increased our capabilities to make sound and timely estimates in the years prior to this war and would have materially improved our wartime intelligence.

Part II

a, b and c. The Operations Division agrees with the concept contained in the directive proposed by the JCS in JCS 1181/5 regarding the coordination of intelligence activities. This directive sets forth, particularly in paragraph 5 thereof, in broad outline, the missions and functions of the Central Intelligence Agency.

It is recognized that the final answer on the difficult problem pre-sented must be obtained as a result of study of the synthesis of the views of all the War Department agencies concerned.

(1) The field of intelligence should be considered as a whole. It is believed dangerous to attempt tight compartmentalization into technical subdivisions, e.g., air, ground, naval, political, scientific, etc.

(2) While probably broad policies must be evolved on the committee basis for the Central Intelligence Agency, the administration and operations undertaken by this Agency should not be subject to the details, compromises and inefficiencies inherent in discussions by committees and subcommittees, but rather should be the responsibility of single heads of subdivision responsible to the Director of the Agency.

(3) One of the first tasks in producing a comprehensive national intelligence system is the development of a comprehensive intelligence plan. This plan should begin by setting down intelligence objectives which probably could be broken down into two categories: (a) routine objectives such as strengths and dispositions of foreign forces and (b) special projects, such as present Russian actions with reference to uranium. The comprehensive plan should go on from the objectives to the scheme for collecting information thereon and this scheme should include the way in which the various agencies undertaking intelligence operations will function in the over-all pattern.

(4) Two functions of the Central Intelligence Agency should include assuring adequate arrangements so that each item of war intelligence is made available to every organization possibly having an interest therein. The exact procedure in accomplishing this objective must be a subject of further study. There is some question as to whether the Central Intelligence Agency can support an organization adequate to act as a "clearing house" for every item of raw intelligence.

(5) The Central Intelligence Agency should be charged with development of a plan and program as a matter of priority for an adequate foreign secret intelligence system for the U.S. It is thought that this might be worked out as a coordinated operation between departmental agencies and an agency working directly under the Central Intelligence Agency coordinating the entire project. The operating agency of the Central Intelligence Agency might also be reasonably charged with the mission of undertaking special intelligence projects, although not necessarily to the exclusion of activities by departmental agencies in connection with the same projects.

(6) The functions of the Central Intelligence Agency should include coordination of the activities of all agencies to determine omissions and duplications and to arrange for the necessary action to remedy such omissions and duplications.

(7) The National Intelligence Authority will of necessity be rather public in character. It will be well to hide the activation of the Central Intelligence Agency. An obscure location and name in the State Department might be a satisfactory method of achieving this objective.

(8) Radio intercept seems to be a technical activity and from the operational standpoint, will probably continue to function best with the departments. As a vital source of information it should be subject to coordination by the Central Intelligence Agency.

The problems which now face the U.S. and will continue to face this country in the future dictate that the heads of the State, War and Navy Departments have knowledge of intentions and capabilities, both political and military, of the other countries. The Central Intelligence Agency should be charged with preparing the required estimates which should be made available to the State, War and Navy Departments and to the JCS to guide them in their plans and preparations.

On the specific problem of the disposition of the remnants of the Office of Strategic Services, it is believed that the Central Intelligence Agency should have a talented analysis and evaluation section. This section should not attempt to handle those matters which fall within the sphere of single departments, but should rather devote its talents to studies which assist the Director and the Authority in determining the current intelligence objectives and the mechanisms for obtaining them. In addition the Central Agency's evaluation section should be the nucleus in preparation of long range over-all intelligence estimates. Such of the OSS personnel and organization now assigned to the State Department as are suitable for the foregoing might well be retained for use in the Central Intelligence Agency.

As to the OSS unit now attached to the War Department,/2/ it is believed that any secret intelligence networks it possesses plus personnel should be retained for review by the Director of the Central Intelligence Agency to determine whether he desires to use any personnel or operating facilities directly under his Agency, the remaining personnel to be absorbed in existing departmental agencies. In this connection the appointment of a Director of the Central Intelligence Agency is a pressing matter.

/2/The Strategic Services Unit.

It is OPD's opinion that the objective of U.S. intelligence coordinated under the Central Intelligence Agency is:

"Establishment and maintenance of a world-wide intelligence and counter-intelligence system capable of furnishing timely information not only of a purely military but also of a political, economic, industrial and scientific nature; of preventing the obtaining by foreign powers of similar information concerning the U.S.; and of deceiving possible enemies as to the capabilities and intentions of the U.S. when that is to her interest." (Quote from para. c, page 10, JCS 1518.)

J. E. Hull/3/
Lieutenant General, GSC

/3/Printed from a copy that bears this typed signature.

37. Letter From the Assistant Director of the Bureau of the Budget (Appleby) to Attorney General Clark

Washington, October 31, 1945.

//Source: National Archives and Records Administration, RG 51, Records of the Office of Management and Budget, Director's Files, Series 39.27, Intelligence. Secret. Revised by Appleby on October 30.

DEAR TOM: Harold and I have given a great deal of thought to the proposal contained in your memorandum "U.S. Secret World-Wide Intelligence Coverage."/1/

/1/Document 17.

The memorandum emphasizes the similarity of the proposal to the "time-proved program" as carried on in South America. It seems to us that the use of the South American experience alone as a basis for a world-wide operation overlooks the vast difference in the two situations.

Should we engage in any clandestine intelligence operations in peacetime, our needs will certainly be far broader than was the case in South America. They will be less related to operational decisions which can be taken instantly. They will need to get at more fundamental and long-range matters in commercial, scientific, and other areas. The proposal seems to speak in terms of security intelligence alone. This limited view of intelligence has, I think, been in part responsible for many of our failures to estimate situations properly in the past, to find ourselves sometimes on guard against the least of our dangers, and to see dangers on occasion that were out of proportion to the real situation.

Some operation such as that described in the memorandum is already being carried on abroad. It seems to us that before any additional or new activity in this field is encouraged, a considerable amount of planning of a Government-wide kind should be accomplished. As you know, the President directed Secretary Byrnes on September 20 to take the lead in providing for such planning and coordinating on a continuing basis.

What we should be striving for is a way to build a Government-wide intelligence operation in which all pertinent facilities or resources in every department are utilized and in which the extreme compartmentation and interdepartmental jealousies characteristic of our wartime operation are done away with. The specific needs of the Government including those of any agency should be determined and operations planned on that basis. Then, too, plans in which the specific operating contribution of each agency is developed, need to be prepared and issued for the guidance of the departments. Neither the Operational Committee nor the Policy Board in the plan you sent me, if I understand their duties, supply this need.

I am informed that the State Department will soon be taking the initial steps to create the interdepartmental committees necessary to begin this long-range job.

With personal regards, I am,

Sincerely yours,

Paul H. Appleby/2/

/2/Printed from a copy that indicates Appleby signed the original.

38. Memorandum From the Director of the Bureau of the Budget (Smith) to President Truman

Washington, October 31, 1945.

//Source: National Archives and Records Administration, RG 51, Records of the Office of Management and Budget, Director's Files, Series 39.27, Intelligence. No classification marking. Drafted by George F. Schwarzwalder on October 25.

SUBJECT

Organization of Intelligence Activities in the Government

Within the past few months, with your approval, a number of steps have been taken to readjust the Government's intelligence activities to a post-war basis and to establish within the normal framework of the Government an effective intelligence operation. These steps have been consistent with a plan for the post-war organization of intelligence which has resulted from several years of study by staff of the Bureau of the Budget. The basic elements of that plan have been discussed with you and were set forth briefly in the memoranda transmitting the recommendations of Mr. Snyder, Judge Rosenman, and myself on the disposition of the Office of Strategic Services/1/ which you approved through Executive Order No. 9621 of September 20.

/1/See Document 2 and footnote 3, Document 4.

Attached is our complete report of recommendations in this field./2/ This memorandum summarizes the recommendations of the report and progress made to date.

/2/Reference is to the Bureau of the Budget report "Intelligence and Security Activities of the Government," September 20. (National Archives and Records Administration, RG 51, Records of the Office of Management and Budget, Director's Files, Series 39.27, Intelligence) See the Supplement.

A Basis for the Post-war Organization of Intelligence

It is commonly accepted that, despite a continuous improvement during the war and some individual instances of successful performance, total performance in intelligence has not been on a par with that of some other nations. My staff has endeavored to determine the administrative reasons for this in order that we might learn from the mistakes of the past in building for the future.

Attached to this memorandum is a report resulting from our studies. It reviews the Government's prewar and wartime intelligence activities and develops conclusions and recommendations. For your convenience, there follows a summary of the principal findings and conclusions of the report.

Summary of findings. The principal weakness has been the inadequacy of the intelligence operations of the departments concerned, indeed the lack of any intelligence operation in the State Department. Inadequate operations have resulted in failure to anticipate intelligence needs, in failure to recognize trends, in lack of perspective, and in inadequate pooling of intelligence except on the basis of mutual exchange of individual reports.

Before the war, and to a considerable extent still, there has been an overemphasis on security intelligence, i.e., intelligence which is concerned with unfriendly or "dangerous" individuals either at home or abroad. The overemphasis on this kind of intelligence was largely responsible for our failure to develop early enough the type of organization necessary to produce really basic intelligence. Further, the continued placement of the security intelligence operation within the same units responsible for more basic intelligence has caused many of our estimates to be overweighted with security considerations and has caused us too often to be on guard against the least of our dangers.

Our wartime expansion was not in accord with any prior plan, nor was there any machinery through which coordination could be achieved. The freedom of funds enjoyed by the departments during the war has not been conducive to the development of a Government-wide integrated program nor has much leadership toward this end been possible during the war because of the fear of interrupting a vital service. Such attempts as have been made, including those undertaken by the Joint Chiefs of Staff, have resulted in ad hoc arrangements to further cooperation rather than to secure real coordination.

Throughout all of our study the newness of intelligence as an operation on anything approaching its present scale was apparent. There still is a widespread misunderstanding of what intelligence is, how it is produced, and in what way it relates to and serves the action and policy-making people. For example, many persons whose active participation in developing an effective post-war operation is essential are still thinking narrowly in terms of spies and intrigue, in terms of current developments and the latest news, or in terms, solely, of the development of new or special sources of information.

Summary of conclusions. The report develops, from an analysis of these weaknesses, four major conclusions and two of secondary importance which are in effect the elements of a plan for post-war organization.

1. Our expanded requirements for intelligence will require more widespread understanding among Government officials and agencies of what intelligence is and how it is produced, and a more widespread participation in the development and implementation of plans for improved operation.

2. The principal intelligence operations of the Government should be organized at the point where decision is made or action taken, i.e., at the departmental, or lower, level and not within any single central agency. Each department (or subdivision of a department) which has important responsibilities in international matters or which has responsibilities for providing the public with information about foreign countries should provide for a competent foreign intelligence operation.

3. The basic intelligence operation in each department should be organized apart from the security or "counter" intelligence operation serving internal security purposes, except for the mutual exchange of highly summarized and significant intelligence.

4. To ensure optimum results from the departmental intelligence and security operations, however, integrated Government-wide programs should be developed under the leadership of the State Department, through the creation of two interdepartmental committees, one dealing with basic intelligence in general (political, economic, military, sociological, geographic, etc.) and the other with security and security intelligence.

Of a less pressing and longer-range nature are the following two conclusions:

5. Some high-level intelligence is needed to guide decisions made at a level above the departments themselves. The State Department should serve as the principal agency for the development or procurement of such intelligence. The President, however, may find necessary an independent research staff to serve his own needs. Should this be found desirable, the research staff should be small and be concerned primarily with bringing together intelligence available in all departments to fulfill a particular need.

6. There may be some need to centralize under the direction of the interdepartmental groups organized under the leadership of the Secretary of State certain operations which are common to all agencies or which for policy reasons may best be performed centrally. The determination of the kind of central operation which will be needed can await study by the central coordinating body provided for in 4, above. In general, however, no operation should be undertaken centrally which can be performed satisfactorily at the departmental level.

Progress in Readjusting to Post-war Organization

The principal steps already taken toward achieving a post-war organization based on the conclusions outlined above are the following:

1. Of greatest importance in strengthening our intelligence for the post-war period, and consistent with the conclusions that the principal intelligence operations of the Government should be conducted within the departments rather than in a central agency, was the establishment of an Office of Research and Intelligence in the State Department. The importance of this step was stressed in the Bureau of the Budget's report to Secretary Byrnes of last summer./3/ On September 28 the Department announced the appointment of Colonel Alfred McCormack as Special Assistant to the Secretary in charge of Research and Intelligence.

/3/Dated August 15. (National Archives and Records Administration, RG 51, Records of the Office of Management and Budget, Director's Files, Series 39.18, State Department Organization and Functions) See the Supplement.

2. On September 20, through Executive Order No. 9621, the Research and Analysis Branch and related non-clandestine activities of the Office of Strategic Services were transferred (effective October 1) to an Interim Research and Intelligence Service reporting to Colonel McCormack in the State Department. The State Department is currently preparing a supplemental budget for the absorption of the Interim Serv-ice, after considerable readjustment and curtailment, into the permanent Department. The Office in the State Department was thus provided with a going and competent research staff.

3. A small part of the Foreign Economic Administration will be transferred to the State Department in accordance with Executive Order No. 9630 of September 27./4/ The Bureau of the Budget is currently working with the State Department in preparing for absorption of the transferred activities.

/4/"Redistribution of Foreign Economic Functions and Functions With Respect to Surplus Property in Foreign Areas"; for text, see Department of State Bulletin, September 30, 1945, pp. 491-492.

4. On September 20, coincident with the public announcement of the OSS transfer, you directed Secretary Byrnes to assume the leadership in developing an integrated Government-wide intelligence program through the creation of interdepartmental committees to coordinate the intelligence operations within the various departments. The immediate problem of building his own facilities and of assembling a staff have delayed action on this matter. Staff of the Bureau of the Budget is currently working with the State Department to assist in organizing these groups and in developing an orderly procedure.

Steps Currently Being Planned

The desirability of effecting a separation of security and security intelligence from basic intelligence will necessitate the organization of two committees in the State Department. It is possible that the State Department will request your approval of an additional directive to the departments concerned to clarify the exact responsibilities placed on the Secretary of State in your previous public letter.

The necessity to secure a more widespread understanding of intelligence and of the principles on which a strong post-war organization should be based, not only among Government officials but in the Congress, is still a paramount problem. During the current period of transition from wartime to post-war operation, it has been difficult to accomplish as much as is desirable toward this objective because of the variety of suggestions for post-war organization currently being considered and advocated. The letters which you made public to Secretary Byrnes and General Donovan have apparently not yet made it sufficiently clear that we are not going back to our pre-1939 situation but are moving in accordance with a plan to develop a more effective program for the future. Within the limitations of available staff, the Bureau of the Budget has endeavored to keep in constant touch with planning now under way in the various departments. The interdepartmental groups which will be brought together under the State Department will accomplish a great deal. Meanwhile, however, the Bureau of the Budget will intensify its activities. Among other things, we intend to give appropriate distribution to the attached report./5/

/5/Attached to another copy of this report are two charts entitled "Plan for Organizing and Staffing: Interdepartmental Coordinating Committees, Intelligence and Security," and a "Functional Organization Chart: Interdepartmental Coordinating Committees Intelligence and Security." (National Archives and Records Administration, RG 59, Records of the Department of State, Records of the Bureau of Intelligence and Research: Lot 58 D 776, History of the National Intelligence Structure) See the attachments to Smith's memorandum to the President in the Supplement.

Action Recommended

With your approval, the specific additional proposals which I shall recommend from time to time relating to the organization of intelligence and security activities will conform to the general plan outlined in this memorandum and in the attached report.

Harold D. Smith/6/

/6/Printed from a copy that indicates Smith signed the original.

39. Letter From the Secretary of State's Special Assistant for Research and Intelligence (McCormack) to the President's Chief of Staff (Leahy)

Washington, October 31, 1945.

//Source: National Archives and Records Administration, RG 263, Records of the Central Intelligence Agency, Troy Papers, Box 10, Folder 73. No classification marking. Leahy met with McCormack on this date to discuss "the formation of a Central Intelligence Service." (Library of Congress Manuscript Division, Papers of William D. Leahy, Leahy Diaries 1945, p. 182)

MY DEAR ADMIRAL LEAHY: Enclosed is the President's Executive Order relating to the OSS, together with his letters to General Donovan and the Secretary of State./1/ On the last page of the attached you will find the place where I have marked to show what the present directive states in respect to machinery for formulation of plans for post-war intelligence.

/1/See Documents 14 and 15, and the source note to the latter.

It has seemed to us in the State Department that this Department should formulate its own plans before going ahead with the interdepartmental group. That position has been acceptable to the Army and, I think, also to the Navy, and the Army has had a Board functioning for the purpose of determining its position on the post-war intelligence problem.

Sincerely yours,

Alfred McCormack

Continue with Document 40