History of American Intelligence” 
by Central Intelligence Agency
     Revolutionary Ideas
In the very first presidential State of the Union address, George Washington requested that Congress establish a “secret service fund” for clandestine (or secret) activities. As the commander-in-chief of the Continental Army during the Revolutionary War, Washington knew how important these clandestine operations were to the new country.
Espionage, counterintelligence, and covert action had all been vital during that war against a powerful, better-funded, and better-organized British army. Washington and fellow patriots like Benjamin Franklin and John Jay directed a wide-ranging plan of clandestine operations that helped level the playing field and gave the Continentals a chance against the British, the world’s reigning superpower at the time.
The feisty Americans ran networks of agents and double agents; set up elaborate deceptions against the British army; coordinated sabotage operations and paramilitary raids; used codes and ciphers; and disseminated propaganda and disinformation to influence foreign governments. Paul Revere was one of the first famous “intelligence” operatives, spreading the word throughout the countryside when British troops were first spied.
America’s founders all agreed with Washington that the “necessity of procuring good intelligence is apparent and need not be further urged…(U)pon Secrecy, Success depends in Most Enterprises…and for want of it, they are generally defeated.”
Congress agreed, and within two years of Washington’s State of the Union speech, the secret service fund represented more than 10 percent of the federal budget. Not too much later, in the early 1800s, Thomas Jefferson drew from this fund to finance the United States’ first covert attempt to overthrow a foreign government, one of the Barbary Pirate states in North Africa.
From 1810 to 1812, James Madison used the fund to employ agents and clandestine paramilitary forces to influence Spain to relinquish territory in Florida. Several presidents would dispatch undercover agents overseas on espionage missions, a strategy pioneered in the United States by Franklin in his role as ambassador before and during the Revolutionary War.
Later, one US spy, disguised as a Turk, obtained a copy of a treaty between the Ottoman Empire and France. Also during this period, Congress first attempted to exercise oversight of the secret fund, but President James K. Polk refused the lawmakers, saying, “The experience of every nation on earth has demonstrated that emergencies may arise in which it becomes absolutely necessary…to make expenditure, the very object of which would be defeated by publicity.”
     Spies Like Us

During the Civil War, from 1861-1865, both the Union and the southern Confederacy engaged in and expanded on clandestine activities. While hot-air balloons—the forerunners of spy planes and today’s satellites—were used to monitor troop movements and regiment size, less visible operations also gleaned important intelligence on both sides.
Though neither government had a formal, national-level military intelligence service, both sides fully used clandestine agents, military scouts, captured documents, intercepted mail, decoded telegrams, newspapers, and interrogations of prisoners and deserters.
The Union’s principal spymasters were Allen Pinkerton and Lafayette Baker, both of whom specialized in counterespionage, and military officers George Sharpe and Grenville Dodge. The Confederacy had a looser array of secret operatives that collected intelligence and conducted sabotage and other covert actions. Three of the South’s most celebrated agents were women: Rose Greenhow, Belle Boyd, and Nancy Hart. In 1864, Confederate operatives tried to organize antiwar elements in Indiana, Illinois, and Ohio in a movement to leave the Union. They also set fires in New York City in an attempt to burn down the huge manufacturing hub of the north.
Both Union and Confederate operatives in Europe spread propaganda and tried to gain an upper hand in foreign commercial interests and war sentiment. Overall, the Union was more effective at espionage and counterintelligence, while the Confederacy had more success in covert operations. The hard-won expertise and organization built up during the Civil War would be demobilized and dispersed following the South’s surrender, but a foundation for the future of intelligence had been set.
   Spy Techniques Shift with New War

The first formal US intelligence organizations were formed in the 1880s: the Office of Naval Intelligence and the Army’s Military Intelligence Division. Officers were posted in several major European cities, principally for open-source collection of intelligence.
When the Spanish-American War broke out in 1898, though, many of those officers switched to espionage. They created informant rings and ran reconnaissance operations to learn about Spanish military intentions and capabilities – most importantly, the location of the strong Spanish Navy.
One US military officer used well-placed sources he had recruited in the Western Union Telegraph office in Havana to intercept communications between Madrid and Spanish military commanders in Cuba.
The US Secret Service—in charge of domestic counterintelligence during the war—broke up a Spanish spy ring based in Montreal before it could infiltrate the U.S. Army.
   Catching Up “Over There” Over Here

By the time World War I started in 1914, the United States’ ability to collect foreign intelligence had shrunk drastically because of budget cuts and bureaucratic reorganizations in the government. The State Department began small-scale collections against the Central Powers in 1916, but it wasn’t until the United States declared war on Germany in 1917 that Army and Navy intelligence finally received more money and personnel. By that time it was too late to increase their intelligence output to aid the cause very much.
The most significant advance for US intelligence during the war was the establishment of a permanent communications intelligence agency in the Army, what would become the forerunner of the National Security Agency. Meanwhile, the Secret Service, the New York Police Department, and military counterintelligence aggressively thwarted numerous German covert actions inside the United States, including psychological warfare, political and economic operations, and dozens of sabotage attempts against British-owned firms and factories supplying munitions to Britain and Russia.
The Justice Department’s Bureau of Investigation (what would later become the FBI) began a counterintelligence role in 1916, and Congress passed the first federal espionage law in 1917.
    Busting Codes and Foreign Agents

Despite US Secretary of State Henry Stimson’s oft-quoted comment that “gentlemen do not read each other’s mail,” by 1941, the United States had built a world-class intelligence capability.
After World War I, American intelligence efforts focused on code breaking and counterintelligence operations against Germany and Japan. The “Black Chamber” under Herbert Yardley, the Army’s Signal Intelligence Service under William Friedman, and Navy cryptanalysts cracked Tokyo’s diplomatic encryption systems. Working backward from intercepts, Friedman’s team figured out what kind of cipher device Japanese used – the “Purple” machine. This intelligence allowed the FBI to launch an extremely effective counterintelligence attack on German and Japanese espionage and sabotage operations in the Western Hemisphere in the late 1930s and early 1940s.
U.S. operatives infiltrated espionage networks and arrested dozens of foreign agents. Unfortunately, the FBI had less success against Soviet efforts to penetrate US government and economic institutions.
   FDR Creates OSS in WWII

With the United States’ entry into World War II seemingly inevitable, President Franklin D. Roosevelt created the first peacetime, civilian intelligence agency in 1941 – the Office of the Coordinator of Information. This office was designed to organize the activities of several agencies.
Shortly after that, the United States suffered its most costly intelligence disaster when the Japanese bombed Pearl Harbor on December 7, 1941. That intelligence failure—which was the result of analysis misconceptions, collection gaps, bureaucratic confusion, and careful Japanese denial and deception—led to the establishment of a larger and more diversified agency in 1942: the Office of Strategic Services, the forerunner of today’s Central Intelligence Agency.