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Special Update #25


1. FBI Reorganization - Good Or Bad?

2.'s Analysis of FBI/CIA Problems

3. Minneapolis FBI Agent's Scalding Memo

4. Conclusions - Bigger Isn't Always Better


As promised in SPECIAL UPDATE #24 last week, this issue will give you a good look at the problems in the FBI and the CIA as analyzed by recently. Stratfor, as you may recall, is one of my very best sources for domestic and international geopolitical analysis. I think you'll find their take on the FBI/CIA problems very interesting.

The timing on this SPECIAL UPDATE couldn't have been better. This week, Attorney General John Ashcroft and FBI Director Robert Mueller announced sweeping changes at the FBI. Those changes include the hiring of 900 new agents to go along with the 7,000 already at the Bureau, and a massive reorganization of the FBI to focus on anti-terrorism activities.

Also this week, a detailed memo from Minneapolis FBI agent Coleen Rowley to FBI Director Robert Mueller was made public. Agent Rowley, an attorney in the Minneapolis FBI office, had tried in vain to get authorization from FBI headquarters in Washington to search the personal computer of Zacarius Moussaoui (the suspected "20th Hijacker") prior to 911. Her group was repeatedly turned down. Now, she suggests there was a massive cover-up at the FBI. More on this later.

While I very much welcome a shakedown and reorganization of the FBI (assuming that really happens), I have to question the logic of hiring 900 new agents as "Step #1" in this effort. It is widely accepted that the FBI has major problems. Call me stupid, but I would think they should reorganize first and then bring on whatever number of new agents are needed to carry out the new-and-improved mission.

Another problem that has come to light since 911 is the fact that the FBI and the CIA are not legally able to share much of their respective intelligence information with each other. As usual, the media tried to blame this problem on the Bush administration. But just as the "what did the President know and when did he know it" routine about 911 failed miserably, so did this one. The truth is, Congress passed the law that prohibits the CIA and the FBI from sharing information in 1960. What else is new?

In this SPECIAL UPDATE, we will look at these issues, plus get Stratfor's excellent analysis of the real problems at the FBI and the CIA.



On Wednesday, FBI Director Robert Mueller announced sweeping changes to the FBI that will "explicitly establish protection of the United States and the American people from terrorism as the highest priority and central mission of the FBI."

In the past, the FBI's mission has been to investigate crimes that had already been committed. Now they say they will re-invent the agency to a new mission that focuses on preventing future crimes and terrorism. Interestingly, these changes have been proposed for years, but prior administrations and the FBI itself have resisted implementing them.

This turnaround, if enacted, will mean a massive change in FBI structure, investigative techniques, culture, attitude, procedures, methodology, technology and hiring practices. As reported, there will be a new emphasis on upgrading computers and technology - almost all directed at homeland security and anti-terrorism.

The FBI has over 7,000 agents now. Under the new plan, some 518 current agents will be redirected to anti-terrorism activities. Many will come from anti-drug operations. Those and many of the new agents will, reportedly, be assigned to new task forces within the FBI such as:

National Joint Terrorism Task Force (all agencies)

U.S. Office of Intelligence (presumably all agencies)

Mobile National Terrorism Response Force

Espionage/Counter Intelligence Division

Analytical Capabilities & Training Technologies

Security & Cyber-Security Measures

Recruiting of Agents With Special Skills

New, Accountable Management at the FBI

If all this sounds very complicated, it is. Now compare the government's latest plans with the problems and possible solutions as analyzed by



May 20, 2002. "On Sept. 16, shortly after the [911] attacks, STRATFOR wrote: 'We have no doubt that, after the databases have been searched, it will be found that U.S. intelligence had plenty of information in some highly secure computer. The newspapers will trumpet, 'CIA knew identity of attackers.' That will be only technically true. Buried in the huge mounds of information perhaps once having passed across an overworked analyst's desk, some bit of information might have made its circuit of the agencies. But saying that U.S. intelligence actually 'knew' about the attackers' plots would be overstating it. Owning a book and knowing what's in it are two vastly different things.

It is difficult to blame Bush for not noticing a vague report on potential hijackings amid the almost limitless stream of other warnings. He cannot be blamed for not seeing the Phoenix FBI field report that never left the FBI... Bush has taken a great deal of flak about issuing vague alerts against which no practical action can be taken. What could he possibly have done with the CIA warning?

What Bush can be blamed for is that, over the eight months following one of the worst intelligence failures in U.S. history, fundamental changes in how the United States carries out its intelligence mission have not even begun. Certainly some senior officials in the counterterrorism area have been dismissed, but the failure that led to Sept. 11 was not personal; it was systemic. It flowed directly from the fundamental architecture of American intelligence.

The Central Intelligence Agency, as the name suggests, was founded to centralize the intelligence function of the United States. It was a good idea then and it is a good idea now. Unfortunately, it is an idea that has never been truly implemented and from which, over time, the government has moved intractably away. A centralized intelligence capability is essential if the United States is to have a single, integrated, coherent picture of what is happening in the world. A bureaucratically fragmented intelligence community will generate a fragmented picture of the world. That is currently what we have.

The problem begins with the division between the CIA's Directorate of Operations (which carries out espionage and covert missions) and the Directorate of Intelligence (which is charged with analyzing the information provided). Perhaps this is good for security -- although the case of convicted spy Aldrich Ames indicates otherwise -- but it is not very good for integrated thinking. A wall between the collectors of information and the analysts of information is like a wall between the senses and the brain. It leads to stumbles.

The problem does not end there. The CIA is an intelligence organization, and its counter-intelligence frequently is given to another agency -- the FBI -- to keep them both honest. The FBI is primarily a police force. It deals with law enforcement on issues from kidnapping to narcotics to embezzlement.

The mindset of counter-intelligence and the mindset of law enforcement are very different. Getting these two cultures to coexist under a single umbrella does not necessarily increase the efficiency of either. One can imagine how, in a field office dealing with drug smuggling and interstate car theft, a report on al Qaeda might have gotten lost in the shuffle.

But such divisions are just the tip of the iceberg. The CIA is tasked with human intelligence. Signal intelligence -- intercepting electronic messages -- is the purview of the National Security Agency, which is not only huge but now is developing its own analytic cadre to make sense of the messages it intercepts.

Image intelligence -- from satellites to U-2s -- is handled by the National Reconnaissance Office (which operates the satellites) and the National Imagery and Mapping Agency (which interprets images and also now makes maps). The latter organization is the result of a merger between the National Photographic Interpretation Center and the Defense Mapping Agency, which were integrated into a single structure because ... well the reasons aren't clear, but it seemed like a good idea at the time.

And still the list goes on. The Defense Department has its own intelligence service, the Defense Intelligence Agency, which focuses primarily on military matters. Of course, the CIA also has a unit focused on military intelligence, but that's fair enough since the DIA also runs Defense Human Services -- which is a human intelligence organization doing what the CIA is supposed to be doing. On top of this, each of the armed services maintains their own intelligence services, replete with signal, image and human intelligence.

Given this incredible tangle of capabilities, jurisdictions and competencies, it is a marvel that a finished intelligence product is ever delivered to decision makers. It is unclear whether any of these agencies completely understand their own internal vision, let alone that they are able to transmit a comprehensive picture to the CIA (which is supposed to integrate all this into a coherent world view and serve it up to the president and other senior officials for action).

Which brings us to the deepest and most intractable problem. As STRATFOR has said before, the U.S. intelligence community is obsessed with the collection of data. Apart from the Directorate of Intelligence at the CIA and sections of the DIA, the rest of the U.S. intelligence system is overwhelmingly geared toward the collection, rather than the analysis, of information. The result is inevitable: a huge amount of information is gathered, but it is never turned into intelligence.

To turn information into intelligence, it must be collated with other information, integrated into a coherent picture, interpreted and used to forecast actions. The current architecture of the intelligence community makes collation and integration structurally impossible. It is not merely a matter of sharing but also a matter of culture.

The FBI collects huge amounts of human intelligence. It has an extremely small analytical staff. Its administrators evaluate the significance of intelligence. Some administrator in the FBI decided that the Phoenix report was not worth pursuing. The facts are not in on this, but it is highly likely that no one provided him with any guidance as to what was significant and what was not, and it is almost certain that he did not have an appropriate context for drawing judgments himself.

Between the labyrinthine structure of the intelligence community and its obsession with collection over analysis, it is inevitable that vast amounts of information never coalesce into intelligence. The collection capacity of the United States, both technical and human, is vast. But it is deliberately and institutionally compartmentalized in such a way that prevents a coherent perspective from emerging.

Even more important, the analytic capability is dwarfed by the collection efforts. Information collected but not analyzed is the same as information that never existed. Continued increases in spending on collection is wasted money unless the analytic program grows faster to make up for tragically lost time.

The CIA failed to bring critical information to the president because it did not know that information. We remain certain that if we searched all of the databases and memos we would find that the U.S. government had collected much of the information that would have been necessary to prevent Sept. 11. It was there. But it wasn't collated, integrated, or analyzed and therefore could not be disseminated.

Bush cannot therefore be faulted for not reacting to reports he never saw nor for failing to react to vague threats. He is, however, entirely responsible for not having taken dramatic and decisive steps toward reorganizing the intelligence community after Sept. 11. He has permitted business to go on as usual, in spite of the manifest failure -- not of the individuals in the community, but of the architecture in which they worked.

The current proliferation of intelligence agencies wasn't the intention of those who conceived of a CIA. There is no reason the United States must endure the proliferation of agencies that leads, regardless of intent, to non-cooperation and non-communication.

Most important, there is no reason at all why the obsession with extraordinarily expensive collection technologies and methods should not be shifted to a more balanced approach between collection and analysis. Intercepting all cell phone conversations out of Afghanistan is great -- but only if someone who understands the Pushtun language is available to translate them and someone with knowledge and imagination is standing by to try and understand what the phone calls meant. Having every phone call in the world sitting in a database isn't worth the price of the computer."



This week, a detailed letter from Minneapolis FBI agent Coleen Rowley to FBI Director Robert Mueller was made public. According to Agent Rowley, her office tried repeatedly to get clearance from FBI headquarters in Washington to search the personal computer of Zacarius Moussaoui (the suspected "20th Hijacker") prior to 911. Moussaoui, you will recall, was the terrorist who was arrested after his flight school reported suspicions about him wanting to learn how to fly jets, but not how to take off or land.

Rowley claims that her unit had confirmed, prior to 911, that Moussaoui was connected to Al Qaeda and Osama bin Laden. They suspected that Moussaoui was a part of a terrorist network that was planning some kind of mission involving aircraft. Despite repeated efforts, their requests to search Moussaoui's computer were denied by FBI authorities in Washington.

On September 11, as the attacks were carried out, Rowley says she desperately tried to get clearance to search Moussaoui's computer from superiors at the FBI in Washington but was turned down once again. She was never told of the Phoenix FBI memo that raised concerns about the number of Arabs in US flight schools.

Rowley now believes it is possible that the tragic events of 911 could have been prevented.

I don't know how Rowley's 13-page memo to FBI Director Mueller became public, but it did this week. Rather than comment on it, you can read it for yourself in the links below. I had already written this SPECIAL UPDATE before the Rowley memo became public. Now, it only confirms my concerns that the FBI needs to be reorganized rather than substantially enlarged.


Let me first state the obvious: despite all the problems, the US intelligence network is the best in the world - hands down, bar none, no question about it; the US has the only intelligence network that spies on everyone, all round the world; no other country has that capability.

The problem is, as Stratfor explains and the Rowley memo indicates, that these various agencies (FBI, CIA, NSA, etc.) have evolved to a point to where they do not work well together. Some of this is the result of infighting, turf wars and internal egos at the various agencies. But some of it is the result of Congressional actions that forbade the agencies from talking to each other.

In the past, the government may have been correct in keeping the agencies separate, and even to prevent them from sharing information at the time such actions were taken. But the world is a very different place now! The threats we face today are far more complicated than the threats of old, such as the mafia, drug trafficking and domestic violence, just to name a few. Going forward, our security and intelligence agencies have to work together.

The Rowley memo suggests that the FBI (and probably the other agencies) are not above cover-ups and misinformation to protect themselves from governmental or public scrutiny.

The government announced its planned changes for the FBI over the last two days, and their new goals and priorities, in principle, sounded excellent to me and others more experienced in this area. But this reorganization will take time, and there is no guarantee that it will be successful.

As usual, the proposed reorganization includes adding 900 more agents to the FBI in the next few months. This is the typical solution to government problems - make government bigger. We can only wonder how many new agents they will soon propose to add to the CIA and the NSA and other government security/intelligence agencies.

The good news, if there is any in this picture, is that the new agents must go through a rigorous training period (at least two years, unless standards are cut) at the FBI Academy. Hopefully, the changes and reorganization announced by Ashcroft and Mueller will be successfully implemented in the existing structure by the time the new agents actually come onboard.

In the weeks ahead, we will see more analyses of the problems at the CIA and the NSA. We can expect similar announcements of major changes at these agencies, no doubt with more agents being hired - for better or worse. Yet in my view, these agencies should be overhauled and fixed before any new staff is added.

In the meantime, the terrorist threats continue to fly out of Washington, however real they may be. Meanwhile, we are protected by the existing security agencies that admittedly have serious problems. As noted earlier, even as screwed-up our security agencies may be, they are still the best in the world. Let's hope and pray that they do a better job next time.


The following article, written by Seymour Hersh, appeared this week in the New Yorker magazine. Let me warn you it is long, but it is very interesting. This story contains more detailed information than I have seen anywhere else about the problems at the FBI, about the terrorists and about how the events prior to 911 unfolded. Because I have not seen some of this information elsewhere, I cannot verify its accuracy. Seymour Hersh has been an investigative journalist since the 1960s, and more than once he has not gotten all his facts straight.

Why the FBI Didn't Know What It Knew.

FBI internal memo is damaging.

FBI Agent Coleen Rowley's Memo to FBI Director Robert Mueller

(This one is also very long.)

Peggy Noonan - FBI problem is even worse than we thought.

P.S. I hope you are planning to have a great summer. I will no doubt have a great summer with my kids and Debi (my wife of 16 years). I haven't written anything about my family in a long time. My kids, Tyler (now 12) and Jordyn (now 10) are at that wonderful age of innocence, where they don't know everything (yet), where they don't have to be watched over every second, and they are great fun to be with (although not all the time). You know. . . the time before they think their parents are brain-dead.

We are blessed to live on the most pristine lake in Texas, Lake Travis (65 miles long), and we are all water skiing enthusiasts. The kids are now bordering on being better than their Dad at skiing (wakeboarding, for sure) and most of the other water sports. Having turned age 50 in March, I'm still trying to stay a step ahead of them. So far, so good.

Anyway, I hope you have a great summer!!

All the best,

Gary D. Halbert

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Forecasts & Trends E-Letter is published by Halbert Wealth Management, Inc. Gary D. Halbert is the president and CEO of Halbert Wealth Management, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, Halbert Wealth Management, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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