This is a partial transcript of "Special Report with Brit Hume," August 2, 2004, that has been edited for clarity.

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BRIAN WILSON, GUEST HOST: The president endorses the idea of a director of national intelligence and a counter terrorism center, which will be outside the White House. This as Washington D.C., New York City and parts of New Jersey go Code Orange, an appropriate time to check in with the Heritage Foundation'a (search) Peter Brooks, an intelligence expert, a former CIA intelligence officer.

Thank you very much for joining us here.

PETER BROOKS, HERITAGE FOUNDATION: Good to be with you, Brian.

WILSON: Let's talk, first of all, about this Code Orange (search) alert that affects Washington D.C., New York City, and this small portion of Newark, New Jersey.

BROOKS: Right.

WILSON: It sounds like we really stumbled into a piece of the puzzle. They've put a lot of other pieces that were already kind of out there together.

BROOKS: This was a big piece. Intelligence is something like a jig saw puzzle. You get different pieces and you put them together and you try to come up with a comprehensive picture of what you are looking at. The problem is you don't always get all of the pieces. So that's the real challenge here.

And this time, especially with this guy Khan in Pakistan and his computer, who tend to be working on communications networks, we got a lot of pieces that we were able to put together and got a very comprehensive picture of what we're looking at regarding the threat.

WILSON: And so some of the stuff that we have heard before, but didn't have a lot of confidence in, seemed to be confirmed by what we found in this...

BROOKS: That's right, "corroboration" is the term. We were able to corroborate this probably with other types of intelligence. We got this guy Ghalaini as well. And so we were able to put all these things together and come up with an idea of what we're looking at.

WILSON: And our Bret Baier just reported that apparently they got a courier, who apparently was trying to get a message from Zarqawi in Iraq to Usama bin Laden (search). Urgently trying to get a message. That's just now starting to bubble up. But that sounds pretty significant.

BROOKS: It's serendipitous. And we may have gotten lucky at this time and it's very important. But you know, day-to-day intelligence is very hard. Roll up your shirtsleeves sort of work, but sometimes you come across the right so far things.

WILSON: Some have said this is the motherload. This is the big break we needed. Do you think that's...

BROOKS: Right now, but there are a lot of cells out there. I think it is. And we don't know when they were going to undertake these attacks. The scary part is that they use very good tradecraft, spy craft in doing this. You saw this stuff, talking about how metals — what temperatures metals melt, the angle of inclination of ramps. All this sort of stuff; that means they had people here or they have people here right now that are doing this casing against these targets.

WILSON: And we've been told in some quarters, get ready to hold on to this Cold Orange all the way through the election.

BROOKS: That's right. But of course, New York has never gone down from Code Orange. Washington is at Code Orange and parts of New Jersey have raised their terror alert. But I think so. But we can never let our guard down, Brian. We can never let our vigilance down because you never know who else is out there operating besides this guy Khan, for instance.

WILSON: Now let's talk about the president's big announce today. He is embracing the national director of intelligence and counter terrorism center, which would be placed outside of the White House. You've had your questions about this whole issue. How are you with this decision?

BROOKS: I think it's a good idea. And I think the president even improved upon it by instead of taking 9/11 Commissions and put it in the executive office or making it Cabinet level, he has put it out. Outside the executive...

WILSON: Why do you think that's important?

BROOKS: Because it allows this person to be independent and impartial, and it lowers the possibility that somebody will say that intelligence was politicized or what we call in the intelligence business "cooking the books." That, in other words, you make intelligence match the policy outcomes you perceive that the policymakers want. So this way, this person will be independent, won't work inside the White House.

Executive office of the president isn't that big. And so putting a large organization in there is problematic as well.

WILSON: This is kind of a broad-brush statement of what the president intends to do. But we still don't have a lot of the details, the nuts and bolts of how this is all going to be put together.

BROOKS: The devil is in the details. What the White House will probably do now is draw up some legislation as a proposal to the Congress over the next 30 days. And then when the Congress gets back, they'll start looking at it. But it's important we move out on the smart lane.

WILSON: So, what is the thing that you have some concern with? Since it's still kind of in the formative stage, we know the president is headed that direction. But we still don't know how it's going to all come together. What is the one thing that you would recommend?

BROOKS: On the national intelligence director, what I'm really worried about is that he not only has the responsibility for the intelligence community, but the authority. Right now, the director of Central Intelligence has all the responsibility but none of the authority for making policy decisions, for making personnel decisions or budgetary decisions. And this person has to have real authority to be able to do that and set priorities for the intelligence community.

WILSON: Well, you've just raised the big question. Is this person going to have the authority to do what needs to really be done?

BROOKS: Right.

WILSON: Especially with when traditionally, so much of the intelligence budget, as have you talked about before, is coming through the Department of Defense?

BROOKS: Eighty percent. There are 15 intelligence organizations. Seven of them belong to the secretary of defense. Eighty percent of the budget belongs to the secretary of defense. Ten percent of it only belongs to the CIA. So if the president is going to do this, he has to write in this legislation, you know, that it be approved by Congress. That this person has real authority for budget, personnel and policy as well. And that it's going to be a real, real change. We haven't changed the intelligence community since 1947. Harry Truman was in the Oval Office.

WILSON: It's been a long time. Somebody said today they asked the president what you need this guy to be, what kind of skills should he have? And it was a pretty lofty list of skills.

BROOKS: Right. You know, it's a very important job. Intelligence is our first defense. Especially when we're at war and we are at war. Whether you are talking about Iraq or the war on terror. Well, one of the most important things is that he has the confidence of the president. That he can look in the president in the eye and the president trusts his judgment, because is he going to have to come up with very important judgments in the future.

WILSON: Peter Brooks, thank you so much. Always good to have you here.

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