Even though the public is widely unaware, government officials and specialists in privacy-related fields are certainly aware of the practice. The question turns into one of civilian privacy vs. national security. Project Shamrock stayed in effect until 1975. Just recently, of course, the FBI caught the infamous hacker Jose Ardita by secretly monitoring computer activity at Harvard University. As you can see, this sort of activity is nothing new.
Current laws are shaky at best.
The loopholes are obvious. Every day we are presented with proof that no communication is private. Present technology makes it easy for the government to secretly scan enormous quantities of data very cost effectively. Almost every day there are stories in the news of civilians arrested for child pornography, embezzlement, drug trade, etc. These arrests usually hold up in court based on evidence from intercepted private communications.