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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

                           

65. Memorandum From Arnold Miles to L.W. Hoelscher of the Bureau of the Budget

Washington, January 3, 1946.

//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. Apparently drafted by Schwarzwalder, whose name is typed in parentheses after Miles' name on the "from" line.

SUBJECT
Recent developments in effort to set up interdepartmental intelligence coordinating machinery

Another meeting in the long series was held on December 27/1/ to secure agreement among War, Navy and State on the form of central organization to be set up in intelligence. At the conclusion of the meeting, Patterson indicated his acceptance of the State Department's plan provided the State Department was actually going to proceed to set up a central intelligence organization to carry out the responsibilities it was assuming under its plan. An officer of the State Department from one of the geographic offices was present acting as a secretary of the meeting, and he interpolated at that point that the question of whether State would have any central intelligence operation was still unsettled. That broke up the meeting.

/1/Presumably a reference to the December 26 meeting of the Secretaries of State, War, and the Navy, see Document 61, or to a follow-up meeting on December 27, which can be inferred from Document 62, although no formal record has been found.

Following that meeting, McCormack met with Smith to report on the apparent hopelessness of proceeding without further direction from the President.

Subsequently, however, Patterson turned over the whole matter to Howard Peterson, the new Assistant Secretary of War, in a memo/2/ in which he said that he was willing to go along with State provided State,

/2/Not found.

(1) Actually created central-machinery comparable to the responsibilities it was undertaking.

(2) Included in its plans a Deputy to McCormack to head the State Department operation, in order that McCormack would be as free as possible to devote his time to interdepartmental problems.

The effort (in which we have been so concerned) to create an effective past-war government-wide intelligence program is thus seen even more clearly than before to depend upon the creation of an adequate and professional intelligence operation in the State Department.

The past gives the military little assurance that sometime in the future they will not be caught short again with a Secretary of State "washing his hands of it" unless they take steps to keep informed independently. Further, the reception now being given to the creation of central intelligence facilities in State by some of the old line people there does not give the War and Navy Departments much encouragement to believe that the State Department can grow up fast enough to assume its new role. They hesitate to pin their faith on State Department leadership in this field which they have come to see as one of the most vital in our peacetime Government. Their advocacy of a central agency (which would be largely staffed and influenced by the military) revolves around the belief that adequate Government intelligence must depend on the military agencies.

The people in State who are talking about dismembering the Research and Analysis operation inherited from OSS by "decentralizing" it to the various offices should understand that the alternative is a central agency under military domination with a full blown research and analysis operation reporting directly to the President.

66. Letter From Acting Secretary of War Royall and Secretary of the Navy Forrestal to Secretary of State Byrnes

Washington, January 6, 1946.

//Source: National Archives and Records Administration, RG 59, Records of the Department of State, Decimal File 1945-49, 101.5/1-646. Confidential. Apparently given to Byrnes by Royall and Forrestal at their January 6 meeting. There is no record of the meeting by any of the participants. See Truman Library, Papers of Harry S. Truman, Post-Presidential Memoirs, Sidney W. Souers interview with William Hillman and David M. Noyes, December 15, 1954. See also Darling, The Central Intelligence Agency: An Instrument of Government, p. 70, and Troy, Donovan and the CIA, pp. 341-342.

DEAR MR. SECRETARY: We have carefully considered your memorandum to us enclosing a Plan dated December 3, 1945,/1/ for the establishment of a National Intelligence Authority. Representatives of the War and Navy Departments have discussed the proposed Plan with your Special Assistant, Mr. McCormack, and have examined certain modifications to the original Plan suggested by him in a memorandum dated December 15, 1945./2/

/1/Not found.

/2/Document 56.

We regret that we are unable to accept the Plan proposed by your memorandum, even with the modifications subsequently suggested. In our opinion, it is inadequate in two respects, both of which we consider essential. It fails to provide for a centralized executive organization responsible only to the National Intelligence Authority and actively assisted by the chief intelligence officials of the three departments. It also fails to provide for centralized performance of two important operating functions, evaluation on a national level and direction of foreign secret intelligence and counterintelligence, with appropriate dissemination in each case.

As you no doubt know, this subject had previously been thoroughly studied by the two services. The Joint Chiefs of Staff, in JCS 1181 series, considered the problem at length and in September 1945 approved a proposal (JCS 1181/5) for a central intelligence organization. In the War Department, a special committee, appointed to consider the subject, recommended the establishment of a central intelligence organization which closely resembled that proposed by the Joint Chiefs of Staff. A copy of this committee's recommendations, which were approved by the Secretary of War and previously furnished to the State Department, is enclosed for reference (Tab A)./3/ The Navy Department examined the War Department plan and agreed with it in substance, although expressing some reservations on the question of an independent budget for the centralized agency.

/3/Document 42.

We understand that you are of the opinion that the War Department plan is inadvisable in that it proposes the establishment of an independent agency, separate from the three departments. We recognize the force of the considerations that have led you to this opinion and are quite prepared to agree that, at the outset, the organization may be housed for administrative purposes in the State Department, and may consist of personnel detailed from the three departments. Under that arrangement, the State Department would furnish necessary administrative services and the chief executive would be, or would become, an official of the State Department. It is possible that the President, in view of his known and acute interest in this subject, may wish himself to select the chief executive. In that case, if the person selected should be an Army or Navy officer, he would be made available by appropriate assignment or detail.

We do not believe, however, that this course requires abandonment of the concept of a central organization with certain operating, as well as coordinating, functions. On the contrary, we propose, as the best solution of this problem, that the enclosed War Department plan be accepted for submission to the President, with such modifications as are necessary to provide that the central intelligence agency shall not be an independent agency, but shall be an organization consisting of personnel contributed by the three departments. This will involve the following principal modifications:

1. The Director should be, or should become, an official of the Department of State, unless the President otherwise determines. He should be appointed by the President, be responsible to the Authority and be removable by majority vote of the Authority's members./4/ He should have no other duties or functions in his own department. He should be assisted by deputies from the two other departments.

/4/This sentence originally read: "He should be appointed by the Authority (unless the President desires to select him), be responsible to the Authority and be removable by majority vote of the Authority's members." The deletions on the source text were made by an unknown hand.

2. Other full-time personnel should be detailed to the central intelligence agency by the three departments. They should be responsible to the Director, except for personal administrative matters, and should have no other duties in their departments./5/

/5/A handwritten "OK" appears in the left margin of paragraphs 2, 3, and 4, and subparagraphs (a), (b), and (c) below.

3. Administrative services should be provided by the Department of State.

4. The provisions relating to the independence of the central intelligence agency, and its budget, should be deleted.

In addition, to conform to your proposal, we would delete the provision that a representative of the Joint Chiefs of Staff be a member of the National Intelligence Authority and would include the following provisions relating to the Intelligence Board:

(a) that the members of the Intelligence Board may be represented by deputies;

(b) that each member should have the functions assigned by paragraph 12 of your Plan in addition to the functions of the Intelligence Board under the enclosed War Department plan; and

(c) that the chiefs of the intelligence agencies of other departments may sit as members of the Intelligence Board, by invitation, on matters of particular interest to their agencies.

We believe that this suggestion will meet your views as to the nature of the proposed organization, while at the same time preserving the centralized executive control and the centralized operating functions which the War and Navy Departments, as well as the Joint Chiefs of Staff, have considered essential.

We hope that you will agree with us that the foregoing proposal should be the one submitted to the President by the three departments in response to his request for our recommendations.

As a possible alternative we are prepared, in the interest of reaching an agreement and getting some form of organization started, to advise the President that we can accept your Plan with the modifications already proposed by Mr. McCormack and certain further modifications referred to below. In this event, however, we shall feel obliged to advise the President that this alternative is in our opinion much less desirable than the one outlined above. The further modifications of your Plan which we consider essential are as follows:

1. Inclusion of provisions that the Executive Secretary will be appointed by the Authority and will be or become an official of the State Department, unless otherwise determined by the President; that the Executive Secretary will have no other duties in his own department, in connection with intelligence activities or otherwise; and that all personnel detailed for full-time duty with the National Intelligence Authority, whether as members of the Secretariat or as operating personnel, will be under the supervision of, and responsible to, the Executive Secretary.

2. Inclusion of a provision that evaluation and synthesis on a national level, direction of foreign espionage and counterespionage, and appropriate dissemination are functions of the National Intelligence Authority, to be conducted under the supervision of the Executive Secretary or an executive responsible to him. This will undoubtedly require elimination of the provision that committees will be the primary means by which the Authority will carry out its mission and modification of the provision making the establishment of such committees mandatory for all subjects.

3. Modification of the provisions dealing with Advisory Groups to provide that there shall be only one such group which shall have generally the composition and functions of the Intelligence Board as outlined in the War Department plan. In connection with such modification, there would be no objection by us to including provisions (a) that members may be represented by deputies; (b) that each member should have the functions assigned by paragraph 12 of the State Department proposal; and (c) that representatives of other intelligence agencies sit as ad hoc members, by invitation, on matters of concern to their agencies.

You will recognize that these modifications are designed to correct the features of your Plan that we mentioned at the outset as being, in our opinion, fundamental deficiencies.

We earnestly trust that one or the other of these alternative proposals, preferably the first, will prove acceptable to you and that we may accordingly proceed in agreement toward the establishment of the new organization. In view of the importance of this subject, we hope to be able to discuss it with you, and reach an agreement, before you leave on your forthcoming trip.

Sincerely yours,

Kenneth C. Royal
James Forrestal

67. Memorandum From the Secretary of State's Special Assistant for Research and Intelligence (McCormack) to Secretary of State Byrnes

Washington, January 7, 1946.

//Source: National Archives and Records Administration, RG 59, Records of the Department of State, Decimal File 1945-49, 101.5/1-746. No classification marking.

The following five further modifications of the War Department plan are suggested:

(1) Secret intelligence and counter-intelligence. The War Department is in a hurry to unload the 2500 people that it has in these activities. A central agency would be greatly handicapped by having to take over these units immediately. Also there are a number of knotty problems to be solved, such as the future of the FBI in South America. It is recommended that the function be not taken over until a complete operating plan has been worked out and approved by the Authority. Such a plan would involve basic decisions as to the extent to which, and the limitations under which, this Government proposes to engage in clandestine operations in foreign countries, including matters which may require Presidential approval.

(2) "Evaluation of intelligence on a national level." This broad function is given to the central agency without any definition of its meaning./1/ Insofar as it pertains to the submission of information to the President, the function is now performed by the State Department, by the Joint Intelligence Committee and by other departments. Before the central intelligence agency actually begins to act under this sweeping grant of authority the meaning of "evaluation on a national level" should be carefully defined and the scope of the agency's duties approved by the Authority.

/1/A question mark has been inserted by hand in the left margin next to this sentence.

(3) Functions of National Intelligence Authority. The War Department plan contains a wholly inadequate statement of the missions of the Authority. The statement of missions as set forth in the State Department plan (to which no objection has been made) should be adopted.

(4) Committees. The Director should be authorized to form interdepartmental committees (including members outside State, War and Navy) as provided in the State Department plan, eliminating, however, the statement that these committees will be the "primary means by which the Authority will carry out its missions."

(5) Bringing additional Department and Agency heads into the Authority. The War Department plan requires approval of the President to the bringing in of additional Department and Agency heads as members of the Authority on matters of interest to them. The provision of the State Department plan in this respect should be adopted, namely that the Authority itself may bring such additional members.

Comment

With the above modifications the plan would still be, in my opinion, unworkable because of the impossible position in which it puts the Director. He will be circumscribed on all sides by the Intelligence Board, consisting primarily of the intelligence heads of the armed services. He can take no "important action" without consulting them; he cannot even entertain a request for an estimate except through a Board member; he can make no estimate for a departmental head without passing it formally through the Board members; he can get no personnel except by their favor; and therefore he would be virtually impotent in discharging his "coordinating" functions.

The one thing that might save him--control of the intelligence machinery and resources of the State Department--is also taken from him by insistence of the War and Navy Departments.

A. McCormack

68. Letter From Secretary of State Byrnes, Acting Secretary of War Royall, and Secretary of the Navy Forrestal to President Truman

Washington, January 7, 1946.

//Source: Truman Library, Official File, 892. Confidential. An unsigned copy of this letter indicates that McCormack was the drafter. (Ibid., Papers of Clark M. Clifford, National Intelligence Authority)

MY DEAR MR. PRESIDENT: Pursuant to your letter of September 20, 1945, addressed to the Secretary of State,/1/ we have constituted ourselves an interdepartmental group to formulate a plan for your approval for a comprehensive and coordinated foreign intelligence program for all federal agencies concerned with that type of activity.

/1/Document 15.

After extensive study, we have unanimously agreed to recommend to you the plan which is attached hereto./2/

/2/The plan was not found attached to the source text but was attached to a copy in the Clifford Papers and is printed here as an attachment. It is virtually identical to the Joint Chiefs of Staff proposal of September 19; see Document 13.

This plan takes the form of a directive establishing a National Intelligence Authority, composed of the Secretaries of State, War and the Navy, which is charged with the responsibility for such overall intelligence planning and development and such inspection and coordination of all Federal intelligence agencies as to assure the most effective accomplishment of the intelligence mission related to the national security. The directive further provides that the National Intelligence Authority shall establish a Central Intelligence Agency, headed by a Director to be appointed by the President on the recommendation of the National Intelligence Authority. The Director is to be advised by an Intelligence Advisory Board, consisting of the heads of the principal military and civilian intelligence agencies having functions related to the national security.

You will note that the plan set forth in the directive contemplates that the Authority, assisted by the Director and the Intelligence Advisory Board, will prepare and submit to you for your approval a basic organizational plan in accordance with the principles set forth in the directive. It is believed to be desirable that the details of the organization should be worked out in the first instance by the officials who will be responsible for its performance.

Accordingly, we recommend that you sign the attached directive.

Faithfully yours,

James F. Byrnes
Kenneth C. Royall
James Forrestal

Attachment/3/

/3/Source: Truman Library, Papers of Clark M. Clifford, National Intelligence Authority. Confidential. At the top of the first page is a note (apparently in Souers' handwriting) which reads "Draft of 1/8/45" [sic]. Subsequent revisions, all by hand, are apparently also by Souers.

Directive Regarding the Coordination of Intelligence Activities

In order to provide for the development and coordination of intelligence activities related to the national security:/4/

/4/The opening sentence is crossed out by hand.

1. A National Intelligence Authority composed of the Secretaries of State, War and the Navy/5/ is hereby established and charged with responsibility for such overall intelligence planning and development, and such inspection and coordination of all Federal/6/ intelligence activities, as to assure the most effective accomplishment of the intelligence mission related to the national security.

/5/At this point the phrase "and an additional representative of the President of the United States" is handwritten.

/6/At this point "foreign" has been added.

2. To assist it in that task the National Intelligence Authority shall establish a Central Intelligence Agency headed by a Director who shall be appointed or removed by the President on the recommendation of the National Intelligence Authority./7/ The Director of the Central Intelligence Agency shall be responsible to the National Intelligence Authority and shall sit as a non-voting member thereof.

/7/The phrase "on the recommendation of the National Intelligence Authority" has been crossed out at the end of this sentence.

3. The Director of the Central Intelligence Agency shall be advised by an Intelligence Advisory Board consisting of the heads of the principal military and civilian intelligence agencies having functions related to the national security, as determined by the National Intelligence Authority.

4. The first duty of the National Intelligence Authority, assisted by the Director of the Central Intelligence Agency and the Intelligence Advisory Board, shall be to prepare and submit to the President for his approval a basic organizational plan for implementing this directive/8/ in accordance with the concept set forth in the following paragraphs. This plan should include drafts of all necessary legislation.

/8/At this point "directive" was replaced with "executive order."

5. Subject to the direction and control of the National Intelligence Authority, the Central Intelligence Agency shall:

(a) Accomplish the synthesis and evaluation of departmental intelligence relating to the national security and other information collected by it and the appropriate dissemination within the government of the resulting strategic and national policy intelligence.

(b) Plan for the coordination of the activities of all intelligence agencies of the government having functions related to the national security and recommend to the National Intelligence Authority the establishment of such overall policies and objectives as will assure the most effective accomplishment of the national intelligence mission.

(c) Perform, for the benefit of departmental intelligence agencies, such services of common concern as the National Intelligence Authority determines can be more efficiently accomplished by a common agency, including the direct procurement of intelligence.

(d) Perform such other functions and duties related to intelligence as the President and the National Intelligence Authority may from time to time direct.

6. The Central Intelligence Agency shall have no police or law enforcement functions.

7. Subject to coordination by the National Intelligence Authority, the existing intelligence agencies of the government shall continue to collect, evaluate, synthesize and disseminate departmental operating intelligence, herein defined as that intelligence required by the several departments and independent agencies for the performance of their proper functions. Such departmental operating intelligence as designated by the National Intelligence Authority shall be freely available to the Central Intelligence Agency for synthesis. As approved by the National Intelligence Authority, the operations of the departmental intelligence agencies shall be open to inspection by the Central Intelligence Agency in connection with its planning functions. In the interpretation of this paragraph the National Intelligence Authority and the Central Intelligence Agency will be responsible for fully protecting intelligence sources and methods which, due to their nature, have a direct and highly important bearing on military operations.

8. Funds and personnel for the National Intelligence Authority shall be provided by the departments participating in the National Intelligence Authority in amount and proportions to be agreed upon by the members of the Authority. Within the limits of the funds made available to him, the Director of the Central Intelligence Agency may employ/9/ necessary personnel and make provisions for necessary supplies, facilities and services. With the approval of the National Intelligence Authority, he may call upon departments and independent agencies to furnish such specialists as may be required for supervisory and functional positions in the Central Intelligence Agency, including the assignment of military and naval personnel./10/

/9/At this point "additional" was added.

/10/An attached organizational chart of the proposed National Intelligence Authority and Central Intelligence Agency is in the Supplement.

69. Memorandum by the Director of the Bureau of the Budget (Smith)

Washington, January 9, 1946, 10 a.m.

//Source: Roosevelt Library, Papers of Harold Smith, Box 4, Conferences with President Truman, 1946. No classification marking. The time on the source text is 10 p.m., but the "p.m." has been crossed out and inserted by hand is "a.m.?" Although written in the third person, this is part of the series of memoranda often referred to as the "Smith Diary." The only other known contemporary account of this meeting by a participant is Admiral Leahy's short diary entry, which simply notes the fact of the meeting and comments: "The Director of the Budget offered many objections that evidently were instigated by the Department of State." (Library of Congress, Manuscript Division, Leahy Diaries, January 9, 1946) President Truman's brief account, which may refer either to this meeting or to a follow-up session on January 12, is in Memoirs by Harry S. Truman, vol. II, Years of Trial and Hope, p. 57.

White House conference on intelligence activities (10:00 am)

(Summary statement)

On Friday, January 4, 1946, Colonel Alfred McCormack, Special Assistant to the Secretary of State, in Charge of Research and Intelligence, telephoned the Director and indicated that he was making progress with the Navy on intelligence matters, but not with the Army, and he asked if the Director had gotten in touch with Secretary of State Byrnes on "our local problem." The Director had not had an opportunity to see Byrnes, but said that he would try to do so.

On Monday, January 7, 1946, the Director had a brief appointment with Secretary Byrnes just before Byrnes left for London. The Secretary apparently told the Director about a proposed Executive Order disposing of the matter of the organization of intelligence activities in the Government. Upon returning to the office, the Director talked to Hoelscher and Schwarzwalder (Administrative Management), who gave him a copy of the proposed Order.

On Tuesday, January 8, 1946, the Director telephoned Matt Connelly (Secretary to the President) and asked him to tell the President not to sign the Executive Order.

On Wednesday morning, January 9, 1946, Connelly telephoned the Director to say that a meeting on intelligence, called by the President, was about to be held, so the Director immediately left the office for the White House. In addition to the President and the Director, participants in the meeting were Admiral William D. Leahy, Chief of Staff to the Commander in Chief of the United States Army and Navy; Judge Samuel I. Rosenman; Brig. General Vaughan, Military Aide to the President; James K. Vardaman, Naval Aide to the President; and several persons from the Navy Department. The War Department and the State Department were not represented. The implication of most of the statements made at the meeting was that intelligence could not be handled in the State Department because that department was too weak.

The Director, who took the part of the devil's advocate, said that when he had added together the figures on Army and Navy intelligence officers, plus the F.B.I. in South America during the war, he found that we had people falling all over themselves in the field of intelligence. He pointed out that while we might put up with this kind of situation during a war, we could not do so as a practical matter while carrying on a continuing basis a 25-billion-dollar budget during peacetime. When Leahy made some comment about the Director's thinking in terms of the budget, Mr. Smith replied that he was not thinking in terms of dollars but rather in terms of organization. Leahy admitted that intelligence had been handled in a disgraceful way, and he said that he could not get any intelligence out of the Army, the Navy or the State Department during the war.

The Director made two points with the President. First, he stated that it is easy to ignore a thing as being only a "little matter of administration" and therefore not too important; but often that "little matter of administration" is the key to the problem in question, and whether or not it is properly handled makes the difference between success and failure in solving the problem. Second, the Director stated that when a subject is left to three departments to divide up among themselves, the worst possible compromise results, and that the President himself must decide how he wants intelligence activities organized.

The Director commented further that he had listened to a good many discussions on the organization of intelligence activities and that personally he was much interested in the subject because he feels that it has a great bearing on our enlarged role in international affairs. He pointed out, however, that he was concerned about the fact that in all that he had heard on the subject there did not seem to be even a clear understanding of what kind of intelligence was being discussed, and he declared that there was certainly need for some definitions. He remarked, "I am not so sure that we are not approaching the subject of intelligence in the most unintelligent fashion."

Continue with Document 70