The Central Intelligence Agency was created by Congress with the National Security Act of 1947 and signed by President Harry S Truman. It is the descendant of the Office of Strategic Services (OSS) of World War II, which was dissolved in October 1945 and its functions transferred to the State and War Departments. But the need for a postwar centralized intelligence system was clearly recognized. Eleven months earlier, in 1944, William J. Donovan (a.k.a. Wild Bill Donovan), the OSS's creator, proposed to President Franklin D. Roosevelt creating a new espionage organization directly supervised by the President: "which will procure intelligence both by overt and covert methods and will at the same time provide intelligence guidance, determine national intelligence objectives, and correlate the intelligence material collected by all government agencies." Under his plan, a powerful, centralized civilian agency would have coordinated all the intelligence services. He also proposed that this agency have authority to conduct "subversive operations abroad," but "no police or law enforcement functions, either at home or abroad."
Despite opposition from the military establishment, the State Department and the Federal Bureau of Investigation (FBI), President Truman established the Central Intelligence Group in January 1946. Later, under the National Security Act of 1947 (effective September 18, 1947), the National Security Council and the Central Intelligence Agency were established. Rear Admiral Roscoe H. Hillenkoetter was appointed as the first Director of Central Intelligence.
In the creation of the Central Intelligence Agency, several disposed Nazi operational agents were recruited as U.S. secret agents, yet formed just a minor portion of the agents at that time; they were induced financially and promised exemption from criminal prosecution and trial for war crimes committed during World War II. Additionally, many scientists were also extracted from Germany in order to aid the U.S.; their recruitment was under aegis of Operation Paperclip.
The now declassified National Security Council Directive on Office of Special Projects, June 18, 1948 (NSC 10/2) provided the operating instructions for the CIA:
Plan and conduct covert operations which are conducted or sponsored by this government against hostile foreign states or groups or in support of friendly foreign states or groups but which are so planned and conducted that any US Government responsibility for them is not evident to unauthorised persons and that if uncovered the US Government can plausibly disclaim any responsibility for them. Covert action shall include any covert activities related to: propaganda; economic warfare; preventive direct action, including sabotage, anti-sabotage, demolition, and evacuation measures; subversion against hostile states, including assistance to underground resistance movements, guerrillas and refugee liberation groups, and support of indigenous anti-Communist elements in threatened countries of the free world.
In 1949, the Central Intelligence Agency Act (a.k.a. Public Law 81-110) was passed, permitting the agency's using confidential, fiscal, and administrative procedures, and exempting it from most of the usual limitations on the use of federal funds. The act also exempted the CIA from having to disclose its "organization, functions, officials, titles, salaries, or numbers of personnel employed." It also created the program "PL-110", to handle defectors and other "essential aliens" who fall outside normal immigration procedures, as well as giving those persons cover stories and economic support. By 1949, the West German intelligence agency Bundesnachrichtendienst, under Reinhard Gehlen, was under the CIA's control.
In 1950, the CIA organized the Pacific Corporation, the first of many CIA private enterprises. Director Hillenkoetter approved Project BLUEBIRD, the CIA's first mind control program. In 1951, the Columbia Broadcasting System began co-operating with the CIA; President Truman created the Office of Current Intelligence; Project BLUEBIRD was renamed Project ARTICHOKE.
During the first years of its existence, other branches of government did not exercise much control over the Central Intelligence Agency; justified by the desire to match and defeat KGB actions throughout the globe, a task many believed could be accomplished only through an approach as equally ungentlemanly as the KGB's, consequently, few in government closely inquired about the CIA's activity. The rapid expansion of the CIA, and a developed sense of independence under the Director of Central Intelligence (DCI) Allen Dulles added to this trend.
Things came to a head in the early 1970s, around the time of the Watergate political burglary affair. A dominant feature of political life during that period were the attempts of Congress to assert oversight of U.S. Presidency, the executive branch of the U.S. Government. Revelations about past CIA activities, such as assassinations and attempted assassinations of foreign leaders, illegal domestic spying on U.S. citizens, provided the opportunities to execute Congressional oversight of U.S. intelligence operations. Hastening the Central Intelligence Agency's fall from grace were the burglary of the Watergate headquarters of the Democratic Party by ex-CIA agents, and President Nixon's subsequent use of the CIA to impede the FBI's investigation of the burglary. In the famous "smoking gun" audio tape provoking President Nixon's resignation, Nixon ordered his chief of staff, H.R. Haldeman, to tell the CIA that further investigation of Watergate would "open the whole can of worms" about the Bay Of Pigs of Cuba, and, therefore, that the CIA should tell the FBI to cease investigating the Watergate burglary, due to reasons of "national security".
DCI James R. Schlesinger had commissioned reports on past CIA crimes; the reports, known as "The Family Jewels", were kept close to the Agency's chest until Seymour Hersh broke the news in an article, in the New York Times, that the CIA had assassinated foreign leaders, and had kept files on some seven thousand American citizens involved in the peace movement (Operation CHAOS). Congress investigated the CIA in the Senate via the Church committee, named after its chairman, Frank Church (D-Idaho), and in the House of Representatives via the Pike committee, named after its chairman Otis Pike (D-N.Y.); and these investigations provoked further politically embarrassing disclosures. Around Christmas of 1974–5, Congress struck another blow for governmental oversight when they blocked covert military intervention in the civil war in Angola. Subsequently, the CIA was prohibited from assassinating foreign leaders.
Further, President Gerald Ford, responding to protests about the intrusive activities of the CIA, set up a "Citizens' Commission" on January 4, 1975 to investigate whether it had spied on Americans inside the U.S. in violation of its charter. The CIA's charter was again enforced, with the FBI solely responsible for investigating U.S. citizens.
Repercussions from the Iran-Contra arms smuggling scandal included the creation of the Intelligence Authorization Act in 1991. It defined covert operations as secret missions in geopolitical areas where the U.S. is neither openly nor apparently engaged. This also required an authorizing chain of command, including an official, presidential finding report and the informing of the House and Senate Intelligence Committees, which, in emergencies, requires only "timely notification".
In 1988, President George H. W. Bush became the first former chief of the CIA to be elected President of the United States.
Previously, the Director of Central Intelligence (DCI) oversaw the Intelligence Community, serving as the president's principal intelligence advisor, additionally serving as head of the Central Intelligence Agency. The DCI's title now is "Director of the Central Intelligence Agency" (DCIA), serving as head of the CIA.
Currently, the Central Intelligence Agency reports to U.S. Congressional committees, but also answers directly to the President. The National Security Advisor is a permanent member of the cabinet, responsible for briefing the President with pertinent information collected by all U.S. intelligence agencies, including the National Security Agency, the Drug Enforcement Administration, et cetera; all fifteen Intelligence Community agencies are under the authority of the Director of National Intelligence.
Many of the post-Watergate restrictions upon the Central Intelligence Agency were lifted after the September 11, 2001 attacks on the World Trade Center in New York City and the The Pentagon. Some critics charge this violates the requirement in the U.S. Constitution that the federal budget be openly published. However, 52 years earlier, in 1949, Congress and President Harry Truman had approved arrangements that CIA and national intelligence funding could be hidden in the U.S federal budget.