This is a partial transcript of "Special Report with Brit Hume," July 19, 2004 that has been edited for clarity.

Watch "Special Report With Brit Hume" weeknights at 6 p.m. ET

BRIAN WILSON, GUEST HOST: The9/11 Commission (search) will release a report this week that reportedly calls for the creation of a new Cabinet-level intelligence czar. Is that needed or is it even a good idea?

For answers we turn to Peter Brooks, senior fellow for National Security Affairs at the Heritage Foundation (search) and a former CIA intelligence officer.

There's a lot of talk that this report is going to come out and say that what we need is not a DCI, director of Central Intelligence, but a DNI...

PETER BROOKS, SENIOR FELLOW, HERITAGE FOUNDATION: Right.

WILSON: And that would be a director of national intelligence.

BROOKS: That's right.

WILSON: What's the difference and what would the change be like?

BROOKS: Well, the DCI currently who is John McLaughlin (search), the acting DCI, director of Central Intelligence is supposed to have oversight over the intelligence community. But he is also the director of the Central Intelligence Agency. He wears two hats. The difference here is what we're going to do is separate those two jobs and have somebody that has real control over the entire intelligence community.

WILSON: Now, let's talk about how our intelligence community is set up. It's set up based on the Cold War basically.

BROOKS: That's right.

WILSON: And...

BROOKS: 1947.

WILSON: You have organizations within the intelligence community like the National Security Agency. That's the people who listen to conversations all over the world. You have the National Reconnaissance office — the NRO. These are the people that use the satellites to look down at other countries around the world. And I guess the question; those are under the military budget, is it not?

BROOKS: That's right.

WILSON: So a lot of the money for intelligence goes through the Pentagon.

BROOKS: 80 percent of the intelligence budget for the intelligence community is the Pentagon's. 80 percent of it. That's a big figure. The secretary of defense owns seven of 15 intelligence agencies, so he has the lion's share of that. So one of the problems about doing this at all, is the turf battles that are going to go on between the Pentagon as not wanting to give up.

But we're in a new national security environment now. It's no longer the Soviet Union and the Soviet army. It's terrorism, weapons of mass destruction and rogue states.

WILSON: But the point is that those are under the Pentagon because they were developed after 1947.

BROOKS: That's right. Basically the 1947 National Security Act. So we haven't had a major reorganization of national security since 1947.

WILSON: Well, after 9/11 we basically reorganized the entire federal government and came up with the Department of Homeland Security. Is it time to do something like that with our intelligence community?

BROOKS: I think we need more consolidation. I don't necessarily think we want to take like 22 agencies and 170,000 employees and put them under one. But we did do that with the Department of Homeland Security. But there are things that need to be done to reform the intelligence community to make it more efficient and more effective. We've had some tremendous failures and we cannot have those again.

WILSON: Well, then what in your mind are the things that need to be changed? What's the reform that we need?

BROOKS: The problem with the director of Central Intelligence is that he isn't. He has all of the responsibility and none of the authority. Because half of those people work for the Secretary of Defense, they're not going to take policy guidance from them.

WILSON: You've been inside the CIA. You know how it goes. Are there serious turf battles that take place? And do they take place today?

BROOKS: Oh, absolutely. We've seen this. I mean there are a lot of people that have different opinions about intelligence. The important thing is that we have a unity of effort and a unity of command. And that we have as few seams of vulnerability in our intelligence business — our intelligence establishment as possible, because that's where the problems come out. Between the CIA and FBI that's a very common example. That's true to 9/11 itself.

WILSON: But of all the reports that came out, one of the criticisms of the intelligence community has been that they got in lock step. They were all going down the same path. They all have kind of got in line with the same set of assumptions. If all of the intelligence falls under one roof, more or less or under one man, isn't it possible that we'll see more of that instead of less of it?

BROOKS: We're talking about groupthink.

WILSON: Yes.

BROOKS: You know, we used to say in the intelligence business if everyone around the table agrees, somebody is wrong. And you need that sort of diversity, the devil's advocate out there. The State Department's Intelligence and Research Bureau, it was talked about today in "The New York Times," disagreed with the things on Iraq. Their voice should have been stronger. So it is important.

And we talk about what are also called the Red Teams. We have outsiders look at how the intelligence community is doing things and take a fresh look at it and shake things up.

WILSON: Now, the question is what the president is going to do now. I mean there are all these recommendations are coming out. He says he is not quite ready to make a judgment about that. He is looking at it. Do you think he might go ahead and go forward with another director of Central Intelligence, a new DCI? Make that appointment in the short-term, and then if re-elected go for a larger re-organization?

BROOKS: That's a tough one. The president, he hasn't made up his mind. You can see today, we're getting very close to election time. The downside is you could have a tough fight in the Senate. You know, a very political fight over appointing somebody. Making it about Iraq and not appointing a new DCI.

And then the other side of it is that if there's some sort of problem down the road with intelligence, he could be blamed that he did not appoint somebody to run the Central Intelligence Agency.

WILSON: The acting DCI appeared on "Fox News Sunday." That's a very rare appearance to have anyone from the CIA come on one of the Sunday talk shows and defend what's going on. Were you surprised by that?

BROOKS: No, not really surprised. What I'm really concerned about is we don't want the intelligence community to reform itself. We need people on the outside. The challenge we're going to have is we're going have all these sets of recommendations. We don't have even the Senate seat recommendation yet. They were not made public. We're going to have 9/11. The House has got recommendations. How are we going to get all those together and use the best intelligence practices to have the best agencies possible?

WILSON: Reportedly again, the 9/11 Commission is going to come out with some information about some of the 9/11 hijackers coming through Iran. That raised a few eyebrows. What did you think about that information?

BROOKS: Well, I don't think we should be really, really surprised by this. Iran is the most active state sponsor of terrorism today. They were involved in the 1996 attack on America's forces at Khobar Towers in Saudi Arabia. They support Hezbollah. I don't think there's really any surprise to us about this.

It's not quite clear yet whether they were involved with 9/11, but Iran is a serious problem on terrorism. It's not only the Palestinian rejectionist groups such as Hezbollah, Hamas and Palestinian Islamic Jihad. It's Al Qaeda as well.

WILSON: All right. So if had you to make a guess about what's going to happen, use your analyst hat here. Tell me what you think.

BROOKS: Well, as far as the CIA is concerned.

WILSON: Yes.

BROOKS: I think it's going to go beyond the election. We're going to have to consolidate. And we may even need another blue ribbon commission to take all of the recommendations we have, put them together, decide on the best practices and move forward.

The problem is, Brian, the down side is if we try and make major changes — we need major changes — we try to make major changes right now. We're in a hot war. We don't want to make ourselves more vulnerable by making changes to what we're doing. We've made a lot of progress already, but there are still things that need to be done.

WILSON: You shouldn't walk away without making that point. Thanks a lot, Peter Brooks. Good to have you here.

Copy: Content and Programming Copyright 2004 Fox News Network, L.L.C. ALL RIGHTS RESERVED. Transcription Copyright 2004 eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, L.L.C. and eMediaMillWorks, Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.