The Spymaster.(Michael McConnell)

Last May, the director of National Intelligence, a soft-spoken South Carolinian named Mike McConnell, learned that three U.S. soldiers had been captured by Sunni insurgents in central Iraq. As a search team of six thousand American and Iraqi forces combed through Babil Province, analysts at the National Security Agency, in Fort Meade, Maryland, began examining communications traffic in Iraq, hoping to pick up conversations among the soldiers' captors. To McConnell's consternation, such surveillance required a warrant--not because the kidnappers were entitled to constitutional protections but because their communications might pass electronically through U.S. circuits.

The kidnappings could have been just another barely noticed tragedy in a long, bloody war, but at that moment an important political debate was taking place in Washington. Lawmakers were trying to strike a balance between respecting citizens' privacy and helping lawenforcement and intelligence officials protect the country against crime, terror, espionage, and treason. McConnell, who had been in office for less than three months when the soldiers were captured, was urging Congress to make a change in the 1978 Foreign Intelligence Surveillance Act, or FISA, which governs the process of eavesdropping on citizens and foreigners inside the U.S. and requires agencies to obtain a warrant within seventy-two hours after monitoring begins. The act was a response to abuses of the Nixon era, when the U.S. government turned its formidable surveillance powers against peace activists, reporters, religious groups, civil-rights workers, politicians, and even members of the Supreme Court. Over the years, the act had been amended many times, but McConnell believed that FISA--a law written before the age of cell phones, e-mail, and the Web--was dangerously outmoded. "If we don't update FISA, the nation is significantly at risk," McConnell told me. He said that federal judges had recently decided, in a series of secret rulings, that any telephone transmission or e-mail that incidentally flowed into U.S. computer systems was potentially subject to judicial oversight. According to McConnell, the capacity of the N.S.A. to monitor foreign-based communications had consequently been reduced by seventy per cent. Now, he claimed, the lives of three American soldiers had been thrown onto the scale.

McConnell is the head of the sprawling assemblage of covert agencies known as the "intelligence community"--a term that first appeared in the minutes of a staff meeting of the Intelligence Advisory Committee, in 1952. That year, President Truman signed a secret memorandum creating the N.S.A., which is still the largest of the sixteen intelligence bureaucracies. The Pentagon has a Defense Intelligence Agency, and each military branch has its own intelligence shop. There are three very expensive technical agencies: the N.S.A., which is responsible for code-breaking, code-making, communications monitoring, and information warfare; the National Geospatial-Intelligence Agency, which makes maps and analyzes surveillance photographs; and the National Reconnaissance Office, which provides satellite imagery. The Central Intelligence Agency is in charge of human intelligence on foreign targets, although the Defense Intelligence Agency also conducts "humint" operations for the military. Domestic intelligence is handled by the Federal Bureau of Investigation, the Drug Enforcement Administration, and divisions of the Department of Homeland Security. The State Department has its own intelligence-analysis bureau, as do the Energy and Treasury Departments. The intelligence community employs more than a hundred thousand people, including tens of thousands of private contractors. And its official budget, which last year was $43.5 billion, omits the military's intelligence operations, which, if included, would probably push the total annual cost past $50 billion--more than the government spends on energy, scientific research, or the federal court and prison systems.

To call the disparate intelligence bureaucracies a community suggests that they share a collegial spirit, but throughout their history these organizations have been brutally competitive, undermining one another and even hoarding vital information. Since the establishment of the C.I.A., in 1947, the fractious intelligence community has botched many of the major tasks assigned to it. Its failures include the Bay of Pigs invasion, the unforeseen collapse of the Soviet Union, the inability to prevent the September 11th attacks, and the catastrophic assessment that Iraq, under Saddam Hussein, possessed weapons of mass destruction. There have been successes--in 2006, American intelligence helped lead to the arrest in England of twenty-four conspirators who were plotting to blow up at least ten transatlantic airliners--but they don't begin to outweigh the damage caused by bungled operations and misguided analysis.

Over the past sixty years, frustrated Presidents and lawmakers have commissioned more than forty studies of the nation's intelligence operations, to determine how to rearrange, reform, or even, in some cases, abolish them. Most of these studies have concluded that the rivalries and conflicting missions of the warring agencies could be resolved only by placing a single figure in charge. Yet, until September 11th, there was no political will to do so. In 2004, after the 9/11 Commission recommended the appointment of a powerful overseer, Congress passed the Intelligence Reform and Terrorism Prevention Act, which created the Office of the Director of National Intelligence, or O.D.N.I. Dissenting lawmakers complained that the new office would simply add another tier of bureaucrats to an already congested roster. Indeed, although the 9/11 Commission suggested that the O.D.N.I. needed no more than a few hundred employees, it has quickly expanded to some fifteen hundred. Most of these additions, however, are transfers from other agencies--a maneuver that has rankled senior intelligence managers, especially in the C.I.A., which fiercely opposed the establishment of the new office. Until the 2004 law passed, the nominal leader of the intelligence community was the head of the C.I.A. Now the agency reports to the D.N.I., just as the intelligence branch of the Coast Guard does.

The reforms came at a time when the basic value of intelligence-gathering was in question. "We have such a huge infrastructure that adds so little to our understanding and frequently gets us in trouble," says Richard Clarke, who served as the counterterrorism coordinator under President Clinton and, until 2002, in the current Administration. "You're left with the impression that it wouldn't make any difference if they didn't exist."

In April, 2005, Congress confirmed John Negroponte, then the U.S. Ambassador in Iraq, as the office's first director. General Michael Hayden, the head of the N.S.A., became his deputy. But Negroponte lasted only two years in the job before returning to the State Department, where he clearly felt more at home. And Hayden left to lead the C.I.A. There were few candidates eager to replace Negroponte in the last two years of an embattled, lame-duck Administration. And although the 2004 reforms had given the director of National Intelligence responsibility for overseeing the community, his powers were limited.