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A Conversation with Michael McConnell [Rush Transcript; Federal News Service]

Speaker: Michael McConnell, Director of National Intelligence, Author, "Overhauling Intelligence," (Foreign Affairs July/August 2007)
Presider: J. Stapelton Roy, Managing Director, Kissinger Associates, Inc.
June 29, 2007


ROY: I would like to welcome you all here this morning for a fascinating session with our director of National Intelligence, Admiral Mike McConnell. Before we begin, however, can I make the traditional reminder that you should turn off your cell phones, beepers, anything that can make noise that will interrupt our session here.

And I would also like to remind you that we are not under traditional council rules today, we are on the record; and so therefore, when we get to the member participant part of the conversation, please frame your questions discreetly and we will not get into any problems on that score.

I think you have the biographic materials concerning Admiral McConnell. He is the busiest person in Washington. We're extremely fortunate to have him here. He has, in a way, the most thankless job in Washington, because if he does his job well, he's invisible, and if things go wrong, he is blamed. So it's a job that does not get public credit when it is done well as much as it should.

If anyone can do it well, it's Admiral McConnell. He's an intelligence professional of a sort that we don't encounter that frequently within the intelligence community. He has 26 years as a professional military intelligence officer, and he's been 10 years with Booz Allen Hamilton working on intelligence and national security issues in the private sector. So we have a director of national intelligence who truly knows the subject well.

And Admiral, I'd like to begin by welcoming you here.

MIKE MCCONNELL: Thank you so much.

ROY: We're very fortunate to have this opportunity.

Would you like to make any comments at the beginning?

MCCONNELL: Sir, I'd just thank you for being here. I'm delighted that you're hosting the event this morning. I look forward to dialogue.

We have many, many challenges. Our community -- just to frame it a bit, the intelligence community is something that's not well embraced by the American public. If you think about our history, we tend to build it in crisis, we sustain it in war, and then we want to make it smaller or less effective or have it go away in a peaceful period.

We went into World War II ill prepared. We mobilized the nation and were able to respond in a very forceful and useful way. And we were about to disassemble the community again at the completion of World War II, but Winston Churchill did us a favor by inventing a couple of terms, the "Iron Curtain" and the "Cold War," and it caused us to stop and think a little bit about the future and how we should posture and so on.

What was captured in the National Security Act for the United States in 1947, among other things, in addition to establishing the Department of Defense and the Department of the Air Force and codifying roles and missions and responsibilities in defense, it established the CIA and the position then of the director of Central Intelligence and the intelligence community.

We had a bipartisan level of support across the Congress and among the American people, and we sustained an extensive and capable community for the entire Cold War and it served the nation well. I got to be a part of it. You hear a great deal about the failures and you hear nothing about the successes. And I can tell you from first-hand experience the successes far, far outnumbered the failures.

There were issues, there were abuses of authority. We went through a trying period in the '70s to have it investigated and create oversight process. Committees were created both in the House and the Senate for intrusive oversight. It was the right thing to do. Laws were established about how we would govern the community. It was the right thing to do.

But we got to a period of time called the end of the Cold War, and the operative term in Washington was "peace dividend," and "peace dividend" meaning let's reclaim the funding. So the community declined in terms of capability and workforce throughout the '90s.

And the rules that were established during the Cold War and post-'70s served us well, but it created seams. In my view, the 9/11 tragedy should have been prevented. It was preventable. But I think the terrorists took advantage of the seams that had been created in the process for how we conduct our affairs, both intelligence and law enforcement. And let me just provide a little context for why I would make that statement.

Think of a very high wall between foreign intelligence -- foreign intelligence, I would emphasize "foreign" -- and anything domestic. So when someone comes to the United States -- I'm not talking about a citizen, I'm talking a foreign visitor -- if they're here, in the eyes of the law they're a U.S. person. So once they're here as a U.S. person, for the most part they're off-limits to foreign intelligence because of the way our rules were established and so on.

Now, you would say, well, that would be the responsibility of the FBI, the criminal authorities, to pick up someone like that. The standard for surveillance or observation or arrest is significantly higher in a criminal situation than it is in foreign intelligence. In my view, the terrorists who perpetrated 9/11 worked in the seam to be behind the wall invisible to foreign intelligence, not breaking the law so they were visible to criminal authorities, and they were able to carry out that act. Even with that, there was enough information in the system that if we had connected all the pieces, it was preventable.

Now, my focus and approach today, coming back to the community after being out in the private sector for 10 years, is to try to have the community collaborate in a way, share information in a way that we will prevent that kind of tragedy in the future.

We are very, very good in foreign intelligence, we're excellent in criminal prosecutions, and we're still addressing and working the issue of domestic surveillance. That is a very emotive issue to the American people. There are many claims and counter-claims, a great deal of it disinformation, and so our effort now is how do we get it captured, debated, codified in law and understood and accepted in a way that we can do the nation's business to protect us from terrorism or other extreme events.

ROY: Let me get into that issue, Admiral, because you've raised big issues. Some people think that in trying to address these questions we have created an ungainly intelligence structure. You have now been in the job of director of National Intelligence for 4-1/2 months now. We now have over 50 years of post-World War II experience running major intelligence operations. With our knowledge and experience, if we were to start from scratch to try to devise the intelligence structure that we need to deal with the current types of threats that we face, do you think that we would end up with a structure that's similar to the one that you now head, or would it be significantly different?

MCCONNELL: Well, first of all let me be a realist and say we can't start from scratch.

ROY: No, I recognize that. This is a theoretical question.

MCCONNELL: If we started from scratch with the awareness that we have today, it's possible we could create a Department of Intelligence. That is one option. Some argued that option when the law was being debated which reformed our community, the Intelligence Reform Act of 2004. Some argued very strongly for that. Those who had an equity or stake in the outcome, particularly if you have intelligence units in an organization, tended to be very protective of their intelligence units.

So as a practical matter, what evolved from the Intelligence Reform Act, there are 16 agencies in the community, and 15 of those agencies work for another Cabinet officer. So as the director of national intelligence, I have a direct relationship with CIA, but the relationship that I have with the other 15 agencies goes through another Cabinet officer. So if my mission is to create a sense of community and trust and sharing and transparency, I have to get a lot of people to agree.

Now the good news is, Secretary Gates in Defense, which is the largest share, as everyone knows, served as the director of central intelligence in the past. He understood the dilemma. Serving as the director of central intelligence, he knew the difficulty of coordinating across the community. We always did well in peace. We sort of did well for war, but it was the crisis period that was always a challenge.

So when I was asked to consider the nomination for the job, as I took some time to think about it, my first phone call was to Secretary Gates, and to ask him, because he had been vocal when he was out of government about what needed to be done. And so what I asked him was, was he supportive of my nomination? We had worked together before. When he was the director of central intelligence, I was the director of NSA, so we knew each other well. And -- but more importantly I said, have you changed your position and would you cooperate with me in attempting to make us achieve a level of collaboration and coordination across this community? And his answers to all those questions were, yes, he was supportive, and he would indeed cooperate. And he's done exactly that.

I've only been on the job for a little over four months, and we've done some major things to create a situation where we can do our jobs across the seams between director of national intelligence and into Defense. Defense has the four largest agencies: the National Security Agency, the National Geospatial Agency, the National Reconnaissance Office and the Defense Intelligence Agency. All of those agencies work for the undersecretary of Defense for Intelligence, General Jim Clapper, Retired General Jim Clapper.

What we did was to create an executive committee so we could coordinate. General Clapper recommended and Secretary Gates agreed that he has another hat called director of defense intelligence. And in that hat, he has a subordinate role to the director of national intelligence. So that's a lot of jargon about internal politics, but let me translate what it really means.

The senior person in Defense oversees the majority of the resources, sits on my management board, and we can coordinate the activities that we have to coordinate. The biggest challenge for us was to get agreement to require joint service in the intelligence community. What does that mean? If you're a member of NSA and you aspire to be a senior, your only path to senior promotion is, you must leave NSA and have a tour in another agency. The same can be said for CIA or NGA and so on.

With General Clapper steering the wagon and Secretary Gates's support, we closed on that agreement. It had been working for 16 months. My predecessor, Ambassador Negroponte, had worked it very, very hard. We could not come to closure, and last Monday, we signed the documentation with seven of the Cabinet secretaries in attendance to make the point. So we now have agreed to a joint community, a joint activity, with significant emphasis on information-sharing across the community. And we are on a path to try to change the cultural approach of the community.

ROY: Admiral, in my introduction, I should have mentioned that in the latest issue of Foreign Affairs, you have a very useful article, called "Overhauling Intelligence," in which you address many of these big intelligence issues. But one of them is a question of, how do we get our law enforcement people and our intelligence people working hand-in-hand with each other? There's an inherent tension or contradiction, if you will, between those two functions. Because the law enforcement people want to use intelligence, and when you use intelligence, you're risking compromising how you acquired it and the sources.

So intelligence people often are reluctant to share their hard-won information with people who might use it in ways that compromise the sources. So it's not simply a question of telling people to cooperate; it's a question of setting up mechanisms that improve the coordination that is necessary for this function. How do you think we're doing on that front? Because ultimately this is one of your biggest challenges.

MCCONNELL: We have a long way to go. Basically we're blending two cultures that have a very different outlook and a very different training base and so on. Let me use a reference to the Department of Defense. I lived through it. Others have either experienced it or read about it.

For years, from the president to the Congress, we encouraged cooperation between the Army, the Navy, the Air Force, the Marine Corps and it didn't exist. It just did not exist. The debate was, how do we force it to come together in a way that we could have joint activity: Army supporting the Air Force or Navy supporting the Air Force or the Army, whatever the case was?

We had a long debate. I think it took six years. It resulted in legislation referred to as Goldwater-Nichols. When Goldwater-Nichols was being debated, the four service chiefs testified that if the Goldwater-Nichols bill was passed, it would ruin the United States military.

We went through one cycle of service chiefs. We had, at that time, a war: Desert Shield, Desert Storm. And then the testimony was, Goldwater-Nichols was the greatest thing that's every happened to the United States military. It created and sustained the greatest fighting force in the history of the world.

We probably are going to have to have something like that that causes these communities to come together. The reason Goldwater-Nichols worked -- the chain of command was streamlined from the president to the secretary of Defense to the area commander to the joint task force commander. And the joint task force commander commanded all forces: Army, Navy, Air Force, Marine Corps, Coast Guard, often even coalition forces.

Another aspect of it was the promotion. When it becomes self-interest, and now it's one's personal career, and the rule said, without joint duty, joint certification, you cannot be promoted to senior ranks, all the sudden each individual in the armed forces was personally incentivized to embrace jointness. It changed literally overnight.

I suspect we're going to have to have something similar in this community to bring the cultures together. I would take --

ROY: Would that require legislation? Or do you think you could do it under your own authority?

MCCONNELL: Perhaps legislation -- the intent of the joint duty arrangements that we just signed out is to do that. Will it be enough? It's not as intrusive or as complete or as effective as the Goldwater-Nichols legislation, but it's a start.

So we're going to try. We'll get some experience. If it's not moving fast enough or being effective enough, I'm sure that either on my watch or the next person would be willing to ask for legislation.

Let me just describe a nuance. If you're in the intelligence business, what you said about protecting sources and methods is exactly right. We always worry about that.

But think about intelligence. You're of no value -- you have no value -- unless you produce information that's useful to someone and you provide it to them. So when you collect information, your thought process always is, how do I capture the data with sufficient quality and quantity so that it would provide us insight, understanding, expertise or whatever the point -- whatever the subject is, so it's more comprehensive; it's more effectively shown.

And you ultimately have to deliver it to someone, and our community wants that to be the president in the president's daily briefing. That's sort of the gold standard. But there are literally thousands of users, commanders and ambassadors and in some cases law enforcement officials and so on. So the community's intelligence is to collect and analyze and provide.

On the law enforcement side, the objective ultimately was arrest and conviction, and if you think about retaining evidence, evidentiary process and containing the information, you're not incentivized to (write for report or write ?) to give away. Your purpose is to get to court for a conviction. And we put those two communities together, so it's a challenge for us now to cause the best of each, the best investigators on one side and the best sort of analytical process on the other side to blend in a way that we can successfully do domestic surveillance.

The community that I came from boldly stamped in our head and sign an oath every year with foreign, foreign, foreign. As long as it was a foreign target, we were pretty much free to do what we had to do to collect information and so on. We were forbidden from crossing to the domestic side. In the law enforcement context, we had probable cause for arrest and conviction and so on, and it wasn't prevention of a crime, it arrest and conviction for violating a law, so it was a very different mindset.

So today with terrorists who are plotting and planning today, the terrorists that are enjoying sanctuary in Pakistan today are planning and plotting mass casualties in the United States. They're look for a seam, and so when they get here -- and they will come -- when they get here, how do we identify them, how do we collect against them and how do we share the information so that we could use the vernacular connect the dots.

ROY: Could I get into the next issue here, because you've -- it's directly related to this.

In your article, you noted -- you note the need to meet our security objectives, but at the same time to protect individual privacy. Now I lived for years under the watchful eye of the KGB in the Soviet Union, and my experience there was that their definition of security was that to achieve it you had to essentially destroy privacy so that we lived in a glass crystal. Our assumption was that every aspect of our daily lives was under total monitoring by the intelligence agency.

My sense in the United States is we're struggling with that issue, but we still don't quite have it right. We have an independent judiciary, we have a free press, which means that we have instruments for trying to strike the right balance that didn't exist in the Soviet Union.

But this is a key responsibility for you is to handle that security aspect, but at the same time to recognize that our society requires and respects the right of privacy. How do you slice that pie?

MCCONNELL: Thank you for the question.

Let me just refer to the Constitution. Probably everyone in this room at one point has taken an oath to protect and defend the Constitution of the United States, in my view, probably the greatest document in the history of the world. The Constitution is inherently -- provides context in conflict. We're all for freedom, everybody in America's for freedom; well, we're also for security. Well, the context of freedom and security, when you think about that, it creates tension. My assertion is we could never be prescriptive enough to have it exactly right when we're thinking about the future. So we create a construct that creates the right tension and the right oversight and the right checks and balances so we can get it right and we can hold people accountable if they violate the process.

There were abuses in the `50s and the `60s and `70s and they were pretty severe, and I've used one example of how that was addressed and I think successfully. And we are at a critical point again because we now need to update it. It's called FISA, the short-hand is FISA, and it stands for Foreign Intelligence Surveillance Act. The abuses of the `50s and `60s and `70s became apparent in the Watergate investigation. There were a number of agencies spying on Americans for whatever reason, justified in whatever context is the wrong thing to do.

So in the debate for FISA, remember Cold War, bipartisan support, national consensus, our policy was containment of the Soviet Union and prevent them from penetrating us to do the things that KGB was attempting to do to you. So there was recognition that we needed to do -- we must do foreign intelligence. So the FISA Act established a process that said we can do foreign intelligence and we're looking outward, and that's the community that I came from, that was their mission. Any time the communications involved a U.S. person -- go back to what I said earlier -- not just citizens, but U.S. persons -- it required a court order. You had to take your case to a judge and present your evidence and the judge would authorize you to conduct surveillance. I believe that's exactly the way we need to be going forward.

Now, here's the problem. When the FISA Act was passed in 1978, most of the communications that were targeted by the United States intelligence community was wireless communications, international wireless communications. So occasionally there's an American talking in that communication, so we established procedures for handling that process. It's called minimization. So if you're in the business, you're trained, you sign an oath, to be refreshed each year, and you know -- if it's inadvertent, you know how to handle it. Anything in the United States -- because in those days we all talked on the telephone that had a wire, it wasn't a cell phone, and the framework was expectation of privacy. So the law in the -- the wording in the law said if it's a wire, a wire, you must have a warrant.

So today if foreigners are talking on communications or e-mail and communications that pass through the United States, by dint of the fact it's in the United States, you must have a warrant. So it presents us with a dilemma that if the target is foreign, my recommendations and my hypothesis is the target is foreign, particularly if it's terrorism or countries that are conducting activities that are detrimental to the interests of the United States, why would the intelligence community be required to have a warrant?

Now, if it involves a U.S. person, my view is, if the intelligence community is conducting surveillance of someone in the United States, foreign power or agent of a foreign power, you certainly should have a warrant. If you cross to the criminal requirements, it's a much higher standard, and let's use a hypothetical. A known terrorist in Pakistan, Iran, Iraq, wherever, makes a phone call in the United States. I would submit at that point in time -- a known terrorist, a plotter, a planner -- probably one of the most important things that the intelligence community would listen to would be that conversation. Now you wouldn't have any prior knowledge to know that you had to have a warrant because you had a foreign target.

So once it happens, you would write your report, and I would submit, now that a U.S. person, if there was indication of terrorism activity, would be subject to a warrant and then FBI -- or how it would play out -- would conduct the appropriate surveillance. As the intelligence community, as long as I'm targeting foreign on the distant end, my recommendation is that the community should not be required to have a warrant.

So this is a very delicate balance. There is a proposal on the Hill now to modernize the FISA legislation. It was created in 1978. It needs to be modernized because the construct for global communications in 1978 is -- what was is exactly different today. Most of the world's communications today are on a wire and much less of it in a wireless context, so we are in a position that we mix information because (of) the process to go through to obtain a warrant even when it's foreign communications. And this community should only target foreign communications.

ROY: Admiral, I'd like to open our conversation up now to our members here. Let me just remind you of the ground rules. Please wait for the microphone, speak directly into it, please stand, identify yourself and please keep your questions as brief as possible.

Yes, sir.

QUESTIONER: Jim Dingman, INN World Report. Admiral, how do you institutionally protect the integrity of the intelligence community when, for example, we've just had a situation with the pre-war intelligence debate on Iraq, where some argue that political ideas of how to determine that intelligence were imposed from above on the intelligence process. How do we reform the situation so you guard against that kind of situation?

MCCONNELL: The eternal challenge for this community. What I would be an advocate for is, the intelligence community should be very much like the U.S. military: totally apolitical. And our first responsibility is to speak truth to power. So it's inherent upon us, as professionals, to obtain the information, do the analysis and make our case. If there's ever any suspicion that it's being misused for any purpose, then we should be forthcoming to make the case and resign or go public or whatever's required for us. But our mission should be speaking truth to power as clearly as we can understand it.

Now, we are product of democracy. Democracy is a very messy thing. Earlier this week I was subjected to a hearing where it was not a pleasant affair. I was challenged on any number of points I was trying to make.

My response to it was, as messy as it is, it's democracy in action, and it's way ahead of second place.

So I would never be an advocate for changing anything, but there is a level of responsibility in the professional community to provide service in the interest of the nation and to speak truth to power as clearly as we possibly can.

ROY: Yes?

QUESTIONER: Karen Monaghan, visiting national intelligence fellow at the Council on Foreign Relations and a 22-year intelligence professional. So there are some of us left. (Laughter.)

In my years here, I've -- a number of members, particularly the younger members, term members, have come to me and said, "How can I help? How can I help the intelligence community?"

And at the same time, the intelligence community is experiencing a loss of employees, many going to contractors.

You spent 10 years in the private sector. I'm wondering if you've given any thought to establishing some kind of a secondment program where intelligence professionals can spend two or three years in the private sector and then come back; and vice versa, the private sector having some experience in the intelligence community and offering what they've learned from the private sector.

MCCONNELL: I think we'll be driven to that whether we plan for it or not, because it's the nature of -- the attitude of the youngsters that are coming in.

But let me make a couple of points that you'll find a little bit surprising. We survey our community from time to time just to see how they're thinking or what they hold dear or what they think about their mission, their jobs and so on. The most recent survey -- the employees at CIA ranked it at the very top. It ranks with the very best companies in the United States, top 10.

We asked them what were they not pleased with, and they were -- they liked the mission. They were challenged by the mission. They loved the work. They liked the organization. The two things they objected to: we don't reward the best people fast enough, and we don't hold the worst people accountable to weed them out.

So we've got some work to do to embrace commercial standards, to drive us to efficiency and excellence, to move the best faster and to be willing to weed out those that aren't performing as well.

Now, with that said, over half our community came into the community since 2001. And the people that are coming in are absolutely brilliant.

Now I had a chance recently to visit Iraq and Afghanistan and Pakistan. Most of the players -- and we'd go into a room about this size, and it's the CIA and NSA and DIA and, you know, so on -- you can't tell the players without scorecard. They don't advertise themselves as one agency or another. And their expectation is collaboration. When you stop and chat with them -- "What's your background?" Oh, Ph.D. from one of the best schools in economics, or "I have a natural language -- I speak eight languages." And his friend says, "No, not right. He speaks nine, if you count English." (Laughter.)

We have incredible talent in this community. They want to be here, they love the work, and they're willing to take risk. There is a lot of personal risk in this business.

The organization that's tasked to do clandestine activity in support of the nation is the CIA. Often you hear the term HUMINT, human intelligence. Where are we on that scale? Do we tend to be too technical? Do we have enough HUMINT?

The conclusion in the Congress and the executive branch is that we sold our HUMINT capabilities short over about the last 30 years. And so we're on a path to probably double our HUMINT expertise and capability.

So we're getting the best people. Many times they sign on for career. But there is an expectation of rotation.

I'm not worried about the number of contractors or how the process work. Quite frankly, my response to that is, thank goodness for the free market, because if you find yourself in need of expertise, technical or analytical or in any dimension, the American free market can provide it.

And the good news, from my point of view, as a manager inside government again, is that when you no longer need that talent, you can turn it back and let it go work on something else. You haven't signed up for a lifetime commitment.

So I in my view, there's an ebb and flow with contractors that's very, very healthy. And if we get it too high, we can take it down. But if we take it down, we have to bring up the government expertise. So it's -- the system works, and it works pretty well.

ROY: Okay.

QUESTIONER: Admiral -- (off mike) --

ROY: We need the microphone.

(Cross talk.)

QUESTIONER: Thank you. Admiral, your observations raise lots of really interesting legal questions in our nation today. The question I have to ask you is probably -- or might be better described as a pursuit of some in-between position. Is there some way of having a check and balance on a timely basis, some sort of independent review of an intelligence decision to take some action domestically, so that we have some sense, at least, some comfort of an absence of arbitrariness, which, after all, underpins that very tension you spoke about in our Constitution?

MCCONNELL: Yes. We do have such a process, and it has been in varying stages of effectiveness. The oversight committees that were established have the right to review all the activities. And literally anything that's done -- anything that's done -- in the United States government that has some indication of risk or covertness or whatever, the leadership of the Congress is informed.

QUESTIONER: On a timely basis.

MCCONNELL: On a timely basis. My requirement, in the law, is not only do I have to tell them, I have to tell them on a timely basis; and not only do I have to tell them about the planning or the successes, I'm required to tell them about the failures.

So it's probably not widely understood. My view is, checks and balances are essential, and oversight is a mandatory part of the process.

So when that works and it's working well, you never hear about the successes.

Now, when there's political disagreement, or there's failure, then the American public is pretty well informed. The disadvantage, from my point of view, is you always hear about the failures, and we never can tell you about the successes. And as I opened up saying earlier, the successes far, far outweigh the failures.

ROY: Yes?

QUESTIONER: Hi. Helima Croft, Lehman Brothers, and former intelligence fellow at the council. I wanted to go back to the issue raised about the talent pool in the intelligence community, because when I was at the CIA, it seemed that it took a very long time to get people on board. And if you had family members who had lived in a place like Pakistan, you probably wouldn't make it through the process, or it would take a very long time. An I'm wondering if you're completely satisfied with the mechanisms you have right now for bringing people on board?

MCCONNELL: Thank you. A great question.

I'm very dissatisfied. And let me use the financial community as an example.

The way I understand it -- and I've asked a number of people about this -- the financial community can bring someone in, and the responsibility of handling billions of dollars in transactions -- that clearance process takes five to 10 days. Now, the change -- the difference is once they're in, it's lifecycle process, so every keystroke is potentially monitorable and investments and accounts and so on.

Now let me go to our side, the government side. It takes us about a year -- (laughs) -- at great expense. There are a few isolated places where someone has taken it upon themselves and they've developed processes that are a little faster, but by and large, it's about a year. All the spies that we've ever identified pass through that process. (Laughter.)

Now what I would highlight is they probably didn't know they were spies when they passed through the process. They were young or whatever, and once they're in, they, for whatever reason -- and we went back and looked at -- I don't remember the exact number; 85, 90 cases -- in all but one case, they did it for money. So -- now, if you start to think about that, once you pass that year's investigation -- which I would say is asking the wrong questions looking in the wrong direction -- they're in, and they know how to beat the system. So if we change the way we think about it, my hypothesis -- and I'm getting a little bit of data on this -- we can save 5 (billion dollars) to $10 billion a year by using the financial services model for getting people cleared, and then once they're in, as a condition of employment, they should be subjected to lifecycle monitoring. And so we'll use the financial services model, and I think we'll save money and have a much, much more effective process.

Now let me go to linguists and Pakistani relatives or whatever. What grew in our -- in -- not in law or not captured in policy but as a practice was as we were engaged in the Cold War, anyone who had relatives in a foreign country could not be trusted, and the rationale was they could be held hostage or threatened, and for blackmail you would compromise secrets or methods or whatever. That became our way of doing business.

Now, my approach to this is to declare that null and void, and we're not going to think about it that way. The very people that we need to attract and retain in this community are people with language skills and understanding of foreign cultures and process and nuance. The very people we need are the ones that are being excluded or have been excluded in the past. So various agencies are approaching it a little bit differently, but we're on a path to make it common across the community that we are going to specifically target first-generation Americans to bring them into the community, to embrace them.

What I would highlight is -- and you always hear the stories of World War II and breaking German codes at Bletchley Park in the U.K. Now, if we applied the same rules then that are applied -- had been applied in the past, most of those mathematicians and code breakers had relatives in a foreign country, so it just doesn't make any sense, but it became our practice over time. So we're going to change it and make it go faster, and we're going to embrace much more diversity, because those are the people with the skills and the expertise we need.

ROY: Yes, sir.

QUESTIONER: I wonder if you could shed --

ROY: Could you identify yourself?

QUESTIONER: Oh, my name is Kenneth Bialkin. Many of us follow the subject of terrorism and terrorists, yet we don't know much about the extent to which the terrorists constitute an organized system with a central command and control, with somebody plotting, like with an Osama bin Laden at top, or whether there is a series of networks sharing only an ideology but not sharing planning for the committing of terrorist acts. I wonder if you could shed some light on what you know about the extent of the international terrorist movement and the extent to which they are coordinated in some form of leadership or whether they are bound together in a loose system of hatred and ideology and act on their own without that kind of command and control.

MCCONNELL: Thank you for the question, and it's somewhere between the two extremes that you've defined or described. It's not centralized with centralized command and control and direction and authority in the context of chain of command the way you would think about military operations or the way the U.S. military would conduct an operation -- the president to the secretary of Defense to the area commander to the joint task force commander -- it doesn't work that way.

It's not totally uncoordinated, either. And currently the two primary leaders are Osama bin Laden and Zawahiri, and they are located in the mountainous area between Pakistan and Afghanistan, probably on the Pakistan side. They provide guidance and coordination. They have lieutenants across the Middle East and increasingly across Africa. And here's the worry: Increasingly, because it's now an ideology and it's published on the website and there's easy access, it can be coordinated in a way and it can be inspirational in a way that people associate or they sign on, and then they pledge allegiance. And so what we are increasingly concerned about is the franchising of al Qaeda's thinking and philosophy in a wide variety of areas. And then as they mature and become self-sustaining, they could continue to perpetrate the activity independent of anything that was going on centrally planned by Osama bin Laden or Zawahiri.

So we have a very vexing problem right now. One of the highest-priority targets of my community is how do we nullify the leadership of al Qaeda to see if we can't cause this current trend, which is on an upward vector, to tip and start down on a downward vector. So the concern is dealing with that leadership as quickly as possible so that we can in fact change the process as it's currently evolving.

We now see al Qaeda movements in Iraq, in Lebanon, in Libya, Algeria; increasingly, they're thinking and talking about Europe; increasingly, they're thinking and talking about having agents that have access to the United States; they're still thinking and talking and planning for mass casualties. So it is coordinated in a very loose sense, but currently it's an ideology that people are volunteering into and are pledging allegiance to.

ROY: Okay. Yeah.

QUESTIONER: Guy Erb from LECG. What mechanisms are in place that link the improved coordination, which you've described at the federal level, to state and local law enforcement?

MCCONNELL: There's a number of things captured in our legislation, and of course the creation of the Department of Homeland Defense (sic/Security). We now have intelligence professionals in the Department of Homeland Defense -- Homeland Security that know how to extract from this community, the national intelligence community. The person who leads that is Charlie Allen, who's been doing this for a long, long time, probably knows as much or more about the national community than anybody in the nation, so he leads the effort at the Department of Homeland Security. He has a very forceful personality. He's one of these people who believes if you come really early to work, you're privileged by being able to stay really at work. (Laughter.) So he's creating a certain level of tension in that organization, but what he's doing is driving us together.

And I believe one of the greatest challenges that I have as the director of National Intelligence -- and I go back to the references earlier about domestic -- about how you do domestic surveillance and then how do you coordinate it across state, local and tribal users -- there's another part of that, is I find state and local are frustrated about how they put information in the system.

Once it's at the national level, it's classified and then it can't go back the other way. So all of those issues we're attempting to work in a way that we clear people faster. And if we have a situation where we need people cleared, we just declare them cleared, as opposed to this long, investigative process.

So -- work in progress, one of my biggest challenges -- I had a chance to meet and talk with the mayor of New York, Mayor Bloomberg, last night, and the police commissioner, who's very, very good at this. They are pleased with how it's working. There are improvements that we can make. So it's a work in progress, and we're focused on it.

ROY: Yes.

QUESTIONER: Lester Wigler, Citi Smith Barney.

An agreement was announced yesterday between the United States and the administrators of the SWIFT network to enable the United States to have access to international financial transactions. Could you comment on if the nature of that agreement is sufficient for you to fulfill your mission?

MCCONNELL: The nature of the agreement is to look for money laundering or terrorist activities moving funds. As we all know, in America, nothing happens without money. The effort for a number of years was to target the funding that would flow to al Qaeda and this leadership, which is in Pakistan, and you're going to have varying levels of success.

Another thing that's very, very important is -- I keep using the term, which is the vernacular now, connect the dots. It's incredible what you can do if you get a tidbit of information that identifies a money transfer or a personality or a name or a reference. And when you can put that together, you can understand a plot.

What I can share with you is, at a minimum, at least at what we can make public, there are 10 plots, plans, where we've saved lives in America because we made those connections. At an unclassified level, which I can't go into any detail, there's a significantly higher number that we've been successful for. So the tidbits of information -- very much like working for a newspaper or doing financial research or doing a paper when you're in college, it's getting the right piece and perspective and context. So when you connect it, you have a better understanding of the whole. Then you can do something about it.

ROY: Back there in the very rear.

QUESTIONER: Thank you. (Name and affiliation inaudible.)

Director, you were quoted as saying about very aggressive intelligence policy from Russia now. So can you explain and what could be your answer for this aggressive position.

Thank you.

MCCONNELL: For aggressive activity by Russia?

QUESTIONER: Yeah, I mean, Russian intelligence.

MCCONNELL: Yes, okay.

Well, I'd probably wind up asking you why they would be so aggressive, but they're indeed very, very aggressive, and this is one of the things that I worry about. We are such an open society. It's very easy to live and work and penetrate the kinds of things that we hold dear, both in the context of what's an open source and the context of what you can learn among a group of colleagues, where you fit into a discussion or whatever. And also, the thing that's made us so incredibly vulnerable is our reliance on networks.

So just think about the way -- I'll use my experience: signals intelligence, intercepting communications. If you go back in time, your opportunity to intercept someone's communications was at the point of communications. So there were a variety of techniques to protect that -- you could encrypt it or you could make it short or, you know, you could do a variety of things. But as a collector, you always had to be right at the right time, and we would think of that as data in motion.

Well, today, the issue is data at rest, because the way we communicate, by and large, is captured digitally and it's stored in some computer. So if you take everything that we are and do and hold dear -- think about money. Money is -- it's not dollars and it's not gold. It's an accounting entry in a computer somewhere. It's a one or a zero. So if you have that information that's stored that has value, it gives you insight or understanding; it's subject to being accessed by someone who would want to penetrate it either from external United States or inside the United States.

So the information is valuable. It has great value to someone who would collect it. And for reasons that are known only to the leadership of Russia, they have made decisions to be extremely aggressive in penetrating things that we hold dear, and it's not just limited to the Russians. There are other countries that are doing this same thing, to try to understand and penetrate and capture the secrets, be they commercial or industrial or Defense or intelligence or classified or unclassified. We are still the target for the world to emulate and to penetrate and to understand.

QUESTIONER: Michael Granoff, Pomona Capital.

Admiral, why do you think that we have not had another terrorist attack since -- major attack in the United States since 9/11? And what do you think that means for the years ahead?

MCCONNELL: Thank you. I appreciate the question.

We haven't been attacked because we've been successful in stopping it. That's the plain answer, and that is as factual and as truthful as I can state it. As I've mentioned earlier, there are -- we've declassified 10 of the events so people could understand. We're trying to make that understood widely.

But when I go in and out of the morning briefing in the Oval Office, this subject is the primary subject we talk about. And the concern on the part of the president is always specific threat information: Understand the general planning; understand the philosophy; what about specific threat information? Anytime we have anything specific, the entire U.S. government mobilizes to be able to address that specific threat.

And on occasion we take great activity, and I tend to be the skunk at the garden party. Remember, my mission is to highlight the warning and highlight the threat. Well, other people then have to react to that, and it's expensive and it's costly and it ties people up in overtime and so on. So the skunk at the garden party says that it's a problem, and then others have to react to it.

We do react. That's the policy of the administration, and it's fairly dramatic activity. How many of you have been annoyed or irritated passing through the process at the airport just to get on an airplane? (Laughter.) Many of those techniques are designed specifically to combat known threats, and we can raise or lower or change or cause the process to change, to be able to combat something we know about.

Last year, there were 50 million visitors to this country. 70 percent of them did not require a visa. If you're a terrorist planner, how would you exploit that? So all of these things are known to those who are planning, and every seam has been examined for penetration.

ROY: Yes.

QUESTIONER: Herbert Levin, Admiral, a former NIO, when I tried to get an NIO for opportunity as well as for warning. But I lost that battle. It's still pretty negative.

MCCONNELL: (Laughs.)

QUESTIONER: First question: When directors would leave the room when policy was going to be discussed, this was very much appreciated. They waited outside and came back in if they were needed by the president. We now have memoirs suggesting that directors played very active roles in policy formulation, and that's much more important than what's in the national estimates. What's your role when policy formulation comes up? Do you leave the room?

And the second question is, has Gates ended these hit teams going out, where ambassadors and station chiefs discovered they had defense personnel with a list of approved assassinations staying in some hotel downtown?

MCCONNELL: Well, first of all, if you're willing to come back, we'll reconsider the NIO for opportunity. (Laughter.)

I am at the meetings when there is -- regardless of the discussion. The way the process works now is I sit in the National Security Council meetings. And generally -- it's probably not 100 percent, but generally wherever that would morph with regard to size or content or focus, I would be in the room.

The position I take personally is I do not want to be a policy advocate. My purpose is to serve policy. When you cross the bright line from service to advocacy, I think it changes the way you think about it. So what I would like to see our community be is present, with the courage to speak truth to power, but not become an advocate for the individual policy in one direction or another.

The way we can provide a level of service is to do it the way the U.S. military tries to do it, provide as clear an explanation of what we see and understand, what the issues are, what the long-range implications are, what the unintended consequences are and so on, but not to be a policy advocate.

Now, on occasion I'm asked to take a position with regard to the policy of the community. Different subject. And I certainly have an opinion on that. But I am included, and I'm very careful not to slip over to the policy advocacy side. I think that would be reasonable and good advice for people who come after me.

ROY: Do you want to comment on the hit-team aspect, or would you prefer -- (laughter) --

MCCONNELL: I was going to slip right by that one if I could. (Laughter.) There's misunderstanding and a lot of myth and a lot of emotion associated with that. It's not totally resolved, but it's under review, and we will get it resolved. And there's a little room for give on both sides and we're working through that. So we'll get it resolved and it will be appropriately addressed.

ROY: Good. Yes, sir?

QUESTIONER: Dick Betts, Columbia University and the council. One of the criticisms of the 2004 reform legislation that created the DNI position was that the old DCI actually had much of the coordinating authority that was a selling point for creating the DNI position, or at least more than many laymen realized, and that the bigger impact of the reform was to create a new, big layer of bureaucracy. So, what's your answer to that criticism?

MCCONNELL: If absolute control is -- on a scale of 1 to 10 is 10, I would say that DCI had maybe 4, and I would say my authority is probably at a 6 or a 7. So I believe that the opportunity to exercise direction and coordination across the community in the current legislation is significantly enhanced over what it was with the DCI.

We've gone to great lengths to create some coordinating mechanisms and so on. I mentioned earlier executive committee. And what I did as a consultant to industry, I just looked at large companies that operate with business units or with companies that then have a corporate headquarters that's lean, and they can make corporate decisions by bringing in the business leaders, the business heads. So that's what my executive committee does.

And one thing that I would observe about government is that it will forever grow given that there's not some checks and balances or oversight. So what I've chosen to do is to use the Joint Chiefs of Staff, the JCS model. You may not be aware, but the size of the Joint Staff is captured in law. There's a cap. And what that means is, when you get to the cap, now you're forced to manage.

And so what I'm imposing on the DNI staff is a cap, and then that will cause us to manage the system below. And it would go to one of those issues that I mentioned that the workforce is unhappy with us about. Let's reward and promote the best, and let's weed out the ones that aren't performing. And so if we are faced with a cap, we are forced to do that. So the last thing I would hope, we never are slipping in a position, is we don't add value. If we don't add value, there is no purpose.

So it's not perfect. It's working. We sit and talk to the president of the United States six days a week, sometimes seven. It makes for a very long day. We're on the Hill on a regular basis for oversight and dialogue.

So I think it's working well. We're managing the budget better. And we're able to focus on things that questions have been asked here in this community: How do you get collaboration; how do you get people in the community better; how do you manage the overall community; how would you recapture acquisition excellence?

Let me just make a point there because it's important to think about this. The DCI, director of Central Intelligence, had special authorities that were different from the Department of Defense. Let me translate that to the layman. If Defense builds it, it will normally cost three times as much and three times as long because the oversight process is so intrusive, it's such an important decision, there are many, many checks and balances.

On the intelligence side, you often need to move fast, create new technology, take risk. So if you're willing to fail at some periodicity, you can be much more successful at a lower cost and go faster.

When I was in the system years and years ago -- I'll go back to the '70s -- we could identify a problem, identify the solution, build the capability, we could do it in four to five years at less than a billion dollars. And the system I'm thinking about, the one I have in mind, if we did it today -- and I just checked -- it takes 15 years and it costs $3 billion.

So what the ODNI is attempting to do is to go back and recapture the excellence of the past. And what are the three ingredients that will be required to do that? First are professional program managers. Remember the peace dividend that I mentioned earlier? When the peace dividend was announced, now we don't value people who are in the system, the one set of fungible skills that were very attractive to industry were program managers who were double -- electrical engineers, EEs, computer science or had very technical understanding. So as the government workforce goes down, they all would flow out to industry. So we lost a significant portion of our professional program managers.

The second thing was stability in the budget. Because there's so much uncertainty in the budget, when we imposed so many of the old DOD rules, we got more expensive and the budgets weren't stable. And the third thing was requirements creep. If you keep adding and adding and adding, you eventually get to the straw that broke the camel's back.

So I've taken one of the deputy directors in this organization, the Office of the DNI, and made that person responsible for acquisition process. I want to reestablish the program managers. We're going to try to get funding stability. We want to have a process that controls requirements. That person has, as of today, has been in government for four weeks, and they have four weeks of government experience. They came from the outside, where they built large things in systems integration and so on.

So will we be successful? Don't know. This is hard, takes a lot of will, but we've started the process. Hopefully, that will be a value added for this community that would never have been added in any other context.

ROY: Admiral, we have run out of time, but I want to thank you on behalf of the council for joining us today. (Applause.)

Thank you all for joining us. This is our last program of the program year, and we'll look forward to seeing you in September.

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