The following is a transcribed excerpt from 'FOX News Sunday,' July 18, 2004:

CHRIS WALLACE, FOX NEWS: Joining us now for a rare and exclusive Sunday interview is the acting director of the Central Intelligence Agency, John McLaughlin.

And, Mr. Director, welcome. Good to have you with us today.

JOHN MCLAUGHLIN, ACTING DIRECTOR OF THE CIA: Thank you, Chris. Good to be here.

WALLACE: As we just pointed out, the 9/11 commission is reportedly going to recommend this week an intelligence czar to oversee all 15 intelligence agencies.

Why do you oppose that idea? And are you concerned that it would diminish the standing of the CIA and of its director?

MCLAUGHLIN: Well, I think we need to take a close look at their report. I haven't read the entire report yet or seen the recommendations. The idea of a czar to oversee the entire intelligence community — a good argument can be made for that. It doesn't relate particularly to the world I live in. I see the director of Central Intelligence as someone who is able to do that and is empowered to do so under the National Security Act of 1947.

So I think with some modest changes in the way the CIA is set up, the director of Central Intelligence could carry out that function well and appropriately.

WALLACE: And do you worry about having another level of bureaucracy so that instead of reporting directly to the president, you then report to this fellow?

MCLAUGHLIN: Yes. You may have noticed in a speech that I made a couple of weeks ago, I expressed that concern. It may be that it can be carried out differently. But as I understand the concept, it would be hard to do it without adding an additional layer of bureaucracy.

WALLACE: And what's wrong with that?

MCLAUGHLIN: Well, let me just say this: I think we need to look seriously at all the proposals the commission makes. I've taken a position, as I just stated. But I think this is a serious report we'll see. We need to look at it, and we need to weight the merits of their recommendations.

WALLACE: Meanwhile, top congressional leaders say the president should name a new permanent director of the CIA right away. It's too dangerous to wait during these difficult times. Putting personalities aside, would that make any difference in the way the CIA operates, whether it's an acting director or a permanent director? And do you worry about the effect of having confirmation hearings and a new CIA director in the heat of a political campaign?

MCLAUGHLIN: Well, all I can tell you, Chris, is that the president has asked me to serve as acting director. And I've gotten up every day since Monday morning with that as my full-time job. I take no position on whether the agency ought to have an acting director or a permanent director. Should the president choose to appoint a permanent director, you can be sure that I'll work closely with that person to make sure that he or she gets launched and prepared to run the agency.

WALLACE: Are you concerned, though — I know you're concerned about the effect that politics and political second-guessing is having on the agency. Wouldn't a confirmation hearing only add to that?

MCLAUGHLIN: Well, I try and stay out of politics. But I think anyone can imagine that in this political season, a confirmation hearing could be a rough passage for someone. But on the other hand, there may be some individual who could be confirmed by acclimation.

WALLACE: And damaging to the agency?

MCLAUGHLIN: Damaging in what sense?

WALLACE: To have a political inquisition, if you will, during a confirmation hearing.

MCLAUGHLIN: Well, you know, I think we're used to criticism. And the way we deal with criticism is not to point fingers at each other and blame people for something that's gone wrong. We try and learn from it. So I would just leave to others the judgment about whether that would be damaging to the agency.

All I know is this — I mean, the key point for me is this: Being acting director doesn't mean part-time director. I'm working full-time on the job, and very intensely focused on the agency's mission, on the needs of our people, and I'm prepared to do this as long as the president wants me to do it. And I've been doing this kind of work for about 30 years.

So I'm prepared to operate this way, or I'm certainly prepared to work with a new director, should the president choose to nominate one.

WALLACE: And I take it that, if you were asked to be the new director, you wouldn't refuse?

MCLAUGHLIN: I take no position on that. I serve at the pleasure of the president.

I'm not campaigning for the job. I'm doing the job.

WALLACE: Let's go back to the blistering report by the Senate Intelligence Committee, and its central conclusion. Let's take a look.


U.S. SENATOR PAT ROBERTS (R-KS): What the president and the Congress used to send the country to war was information that was provided by the intelligence community, and that information was flawed.


WALLACE: Mr. McLaughlin, did this country go to war based on bad intelligence?

MCLAUGHLIN: You know, I think that's a bad way to describe the situation. I've acknowledged in a press conference I did about a week ago that there were shortcomings in this intelligence. I summarize that by just saying three words, "We get it." And I can talk to you more about that, if you wish.

But I think the debate to go to war was more complex than the issues that are summarized in this single intelligence estimate that was studied carefully by the Senate committee.

If this estimate, if this intelligence projection was the reason, I think more would have been made of some of the things in the estimate.

There would have been a debate about the fact that we said he did not have nuclear weapons, although we projected he could get them in five to seven years. There would have been more debate and more attention paid to the fact that within this estimate there are very serious dissents within the intelligence community, dissents over things like whether he was reconstituting his nuclear weapons — the State Department took a strong exception to that — dissents over whether and when he would use these weapons, and under what circumstances.

So there was ample material for debate. This is the important point: I think there were other elements in this debate. We have to go back to that period, and remember that it was also about 12 years of confrontation with Saddam. We were still flying the no-fly zones at this point. It was also about deception, in his declaration as late as December. It was about the fact that trust — there were questions about whether he could be trusted to inform inspectors about his weapons of mass destruction program. It was about all of these things as well.

And thrown into the mix, I think, for people who had to make this decision, in Congress and the executive branch, were also factors related to the post-9/11 risk calculus: How much risk do you want to take in that environment?

WALLACE: But, Director McLaughlin, forgive me, I wonder if shortcomings does it, in terms of describing what the national intelligence estimate said. Let's put up some of the central conclusions — these were the conclusions of the NIE that your agency prepared for Congress and the president: Iraq has chemical and biological weapons; Iraq is reconstituting its nuclear program.

I know intelligence agencies all around the world were saying the same thing, and you can talk about caveats in the body of the report, but when you're saying they have these things, they're reconstituting, how do you expect elected officials to ignore that? In the end, after looking at all the caveats, that's what the CIA was saying was the conclusion.

MCLAUGHLIN: Well, you're correct, and I wouldn't deny that.

WALLACE: That's more than a shortcoming.

MCLAUGHLIN: Well, you're correct, and I wouldn't deny that. But I would try and put that in a little perspective by saying that, among other things, I think we allowed collectively the image to grow that there would be discovered immediately upon entry into Iraq large stocks of weapons, chemical and biological. You've heard me say before, I think, that those weapons could be hidden in something the size of a backyard swimming pool, or, in the case of anthrax, sizable amounts in the trunk of a car.

Now, to be sure, we haven't encountered those weapons yet. And there will always be some ambiguity about whether they exist. But the longer we look, the more skeptical we have to be.

One thing we have to worry about, though, is that, in the focus on the absence of those weapons, if they truly are absent, there's a tendency to assume that there were no dangers here, that there was nothing going on in Iraq, that there were no things to be worried about.

Since the war, that's another thing that's lacking. And to be fair to the Senate, they deliberately excluded things after October 2002. But since October 2002, when this estimate was finished, we've had underway a robust and extensive effort in Iraq, under first David Kay and then Charles Duelfer, to find out what was really going on. And while we haven't found stockpiles of weapons, we have found that Saddam was in materiel breach of 1441.


WALLACE: Let me ask you, because you keep seem to be sliding around this a little bit, do you think there's still a possibility stockpiles of weapons will be found?

MCLAUGHLIN: I don't know. But as I say, the longer we look and don't find them, the higher the likelihood that we will not find them and that they don't exist.

WALLACE: I want to ask you about the question of pressure but not what's been focused on so much — the question of whether you were pressured by the administration — but whether, in fact, the CIA pressured the politicians.

According to Bob Woodward's book, "Plan of Attack," you delivered a briefing to the president December 21, 2002. And here's how Woodward describes it.

"When McLaughlin concluded there was a look on the president's face of, 'What's this?' Bush turned to Tenet, 'I've been told all this intelligence about having WMD and this is the best we've got?' From the end of one of the couches in the Oval Office Tenet rose up, threw his arms in the air, 'It's a slam dunk case,' the DCI or Director of Central Intelligence said."

It sounds like it was the CIA pressuring the White House?

MCLAUGHLIN: No, I wouldn't say that. What we were trying to do at that point is simply lay out what we understood to be the evidence behind our understanding and belief that Saddam had weapons; a belief, of course, we shared with everyone else in the world, including other experts.

WALLACE: But the president wasn't convinced. then Director Tenet said, it's a slam dunk.

MCLAUGHLIN: Well, let me just say, I would take off the table any discussions that occurred in the Oval Office. That's something that we don't discuss. And I would also say that, you know, with regard to that characterization of our Director Tenet, whatever else someone may say, I would characterize it as a distortion of his more nuanced view of the subject. This is a guy who speaks in colorful language. But I don't want to talk about exchanges with the president in the Oval Office.

WALLACE: Let's talk about something you'll happy to know, that the Senate committee says that you got right. Let's put this up. The CIA's assessment that there was no evidence proving Iraqi complicity or assistance in an Al Qaida attack was responsible and objective.

But, Mr. Laughlin, that wasn't what the president was saying. Let's take a look.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We have to distinguish between Al Qaida and Saddam when you talk about the war on terror.

This is a man who in my judgment would like to use Al Qaida as a forward army.

We've removed an ally of Al Qaida, and cut off a source of terrorist funding.


WALLACE: If the CIA wasn't telling the president that Iraq and Al Qaida were allies, where was he getting that information?

MCLAUGHLIN: Well, first, I don't want to try and parse words between things that the administration said and things that intelligence said. I mean, all I can tell you is what intelligence said is on the record in black and white. And I would also say...

WALLACE: And what would you say the intelligence view was? I mean, you certainly talked about conversations and ties that took place. But would you describe it as an alliance, as a working relationship?

MCLAUGHLIN: Well, that's one of the things that's complicated this debate. People have parsed what the president says, people have parsed what we said.

WALLACE: I'm asking you what your view is.

MCLAUGHLIN: Well, I'll tell you what our view is, but I want to preface that by saying that in my judgment, a lot of this is an argument about words: What does relationship mean and what does cooperation mean and so forth?

We were very careful to document what we thought was going on. And essentially it came down to three things. We could, through intelligence reporting, say with some credibility that there had been meetings between senior Iraqi officials and Al Qaida — officials. We could also say that there had been some training that had flown back and forth between the two sides. And we could say that there was some degree of safe haven that Al Qaida-related people had obtained in Iraq for a variety of reasons. We could also say with some assurance that operating from Iraq, someone like Abu Musab Zarqawi had arranged the assassination of an American diplomat in Jordan.

What we can't say is that there was some relationship of operational control or command between Saddam and Al Qaida. But this is something that is — I would say this about it, too. This is an evolving story. This is one of those stories where we learn something new every week when five years from now people may have a different view from this.

And I would also say about our policy community — you know, one of the founders of intelligence analysis always reminded us — Sherman Kent — that policy-makers make their judgments on the basis of more than just intelligence. They look at an array of things, sometimes a dozen or more things when they form their judgments. They read the intelligence themselves. They listen to outside experts.

On the whole WMD question, for example, you know, it isn't just that outside experts had the view that we projected. They had it even more vigorously. If you were to have looked at what people said in testimony to Congress in September, prior to the war, you would find that people were actually more robust and more determined and had more conviction in their projection than we did.

WALLACE: I want to...

MCLAUGHLIN: So policy-makers listen to all these things, and they have to formulate their own views.

WALLACE: I want to get into one more issue before we take a break. John Kerry called for doubling the number of American agents overseas this week. But back in the '90s, in fact, he called for cuts of billions of dollars in the intelligence community.

WALLACE: What is Congress' role in all of this? How much responsibility does it bear for having undercut the human intelligence and other resources all the way back from the 1970s?

MCLAUGHLIN: Well, I don't want to get into the politics of it, of course. But I think this is an important point because in the '90s, in fact in 1998 when inspectors left Iraq, we were at the bottom. We were almost in Chapter 11 in terms of our human intelligence collection. When George Tenet became director, we had about a dozen people being trained to be clandestine service officers overseas. These are the people who collect human-source intelligence.

We are now graduating the largest classes in our history. And I know Director Tenet and I wonder where a lot of these folks were back in the '90s when we really needed HUMINT and when we were struggling to get up off the ground.

We welcome the increased HUMINT now, the increased interest in HUMINT now. But I think, too, one of the things that's come through in this debate is that people making vast generalization about the quality of our HUMINT.

Remember, we were the first agency into Iraq — into Afghanistan — 17 days after 9/11. And we didn't get in there just with helicopters. We got in there because we had human sources who could help us get in there and, with our military colleagues, bring about the victory that ensued.

WALLACE: All right, we have to take a break here. But when we return I want to ask you about the current terror threat against the United States.

And we'll be back in a moment. Stay with us.


WALLACE: And we're back now with the acting director of the Central Intelligence Agency, John McLaughlin.

This week, you said the terror threat against this nation is as serious as at any time since 9/11. How solid is that information?

MCLAUGHLIN: We have high confidence in the quality of the information we have at this point. And bear in mind, this isn't just based on what people often call chatter. We've had a lot of experience over the last three years. We've disrupted plots — maritime plots, air plots, plots against infrastructure, plots being planned overseas — to unfold in the United States in all of these things. And we've learned a lot about Al Qaida's methods, its targets.

And so we have confidence against this background of intelligence reporting and not inconsequentially the fact that people like bin Laden and Zarqawi over the last six months or so have, on a number of occasions, made very specific public pronouncements.

It's important to remember here that for these people, an attack in the United States is the brass ring.

WALLACE: And I have to ask you, because you say you have disrupted attacks, how close have any of those attacks gotten to hitting the U.S. mainland?

MCLAUGHLIN: Well, we know that the attacks we've disrupted were in the early planning stages to mount attacks in the United States. And so that was the intention. I can't really give you a sense for how close they were. The important point is that was their intention. And we have disrupted those.

WALLACE: And you say it's the brass ring, meaning that their desire, their determination to hit the U.S. mainland is undiminished?

MCLAUGHLIN: Yes, that's right. Now it's important to realize that Al Qaida has been weakened through the very strong attacks that have come since 9/11. They're weakened at the leadership level. They have lost a lot of the territory that they once controlled. They have more trouble moving money. And they have more trouble communicating internally.

But that said, we see a trend toward decentralization of control and authority within the movements, still inspired by bin Laden and Zawahiri at the center. And that kind of decentralization was manifested in things like the attacks we've seen in Bali and Istanbul, Morocco, Madrid. These were Al Qaida-related, but with more local control.

Now the important thing here to remember is that while I talk about a weakened movement and while I talk about a movement that has been disrupted, I don't want to be falsely reassuring here. I mean, we can be successful 1,000 times and these people have to be lucky only once.

So this is still a serious fight we're in.

WALLACE: Where is Osama bin Laden, and why can't we catch him?

MCLAUGHLIN: Well, I can't talk to you obviously about our understand of where he is. Look, we...

WALLACE: We keep hearing that he's in this border area between Afghanistan and Pakistan. I mean, that's been widely reported. Do we think it's...

MCLAUGHLIN: A lot of the reports indicate that, and we give some credibility to that.

What I would tell you is that it's difficult to catch a single individual. You remember a person shot a bunch of CIA employees out in front of our headquarters in 1993. It took us four years to catch him. Khalid Sheikh Mohammed, the architect of 9/11, it took us seven years to catch him. Bin Laden's time will come.

WALLACE: I want to ask you, because you've had the benefit of reading part of the 9/11 commission report that's going to be issued this Thursday and we haven't, what do you think of it, and do you take exception to some things?

MCLAUGHLIN: Well, you know, I think this is a serious report, and the nation needs to look at it seriously. We need to look at it seriously. There will be things we agree with, things we take exception with.

One thing I'm gratified to see is that the 9/11 commission, I believe, will acknowledge that the CIA and the intelligence community were in the forefront of this fight long before 9/11. I think they will understand as well that we've been in the forefront of the fight since 9/11.

I believe we gave warning across the board to our policy makers before 9/11, although we couldn't give them the specificity they needed to act to counter the threat.

One thing people have to keep in mind when they read this report is that the CIA of today — and this would be true of many elements of the intelligence community, including, I think, the FBI, although don't want to speak for Bob Mueller — but the intelligence community of today is not the intelligence community of 9/11. The intelligence community of that day was for counter-terrorism, 300 people spread- eagled across a dike. We now have a 100 people who do nothing but watch listing alone.

We've also gained a lot of experience at disrupting plots. We've gained a lot of experience in doing joint operations with the FBI. The intelligence community is totally latched up on this.

Still a tough fight. And again, I don't want to be falsely reassuring here.

Now, all of that said, I think is a very serious report, and my hope is, my hope is, as people who are the front lines of this fight, that what we do with it is take it and project forward and try and understand what it is we can do to make our country safer.

WALLACE: One thing that has been reported out of the commission's findings, is they say that Al Qaida's links to Iran were in fact much stronger than were to Iraq, and that eight to 10 of the 9/11 hijackers actually had safe passage through Iran on their way west. Is that true?

MCLAUGHLIN: Well, this is not surprising to us. We've known for some time that — I think the count is about eight of the hijackers that were able to pass through Iran at some point in their passage along their operational path. This is not surprising. I mean, Iran has been on the list of state sponsors of terrorism for many years. Iran is the place where Hezbollah, an organization that killed more Americans that Al Qaida before 9/11, draws its inspiration and its finances.

MCLAUGHLIN: And we have ample evidence of people being able to move back and forth across that terrain. However, I would stop there and say we have no evidence that there is some sort of official sanction by the government of Iran for this activity. We have no evidence that there is some sort of official connection between Iran and 9/11.

WALLACE: Has Ambassador Joseph Wilson misrepresented the circumstances surrounding his report on Iraq trying to get uranium in Africa?

MCLAUGHLIN: That's one I don't want to get into because there's a Department of Justice inquiry under way about the leak of his spouse's name, so...

WALLACE: I'm not asking you about that.

I'm being very careful about not asking you about whether his wife recommended the trip or not. But let me ask you about his report.

Did his report, as he claims, disprove that the idea that Iraq was trying to get yellow cake, uranium from Africa?

MCLAUGHLIN: I think that's a tough one, it really is a tough one for me to comment on. I remember his report. I think there's some debate about what his report said or didn't say. I just don't want to take a position on it.

WALLACE: OK. This week — and we talked about this a little bit earlier — you said the intelligence community shouldn't be blamed if there wasn't enough debate about the decision to go to war.

Do you feel the administration and Congress are, in some sense, passing the buck here?

MCLAUGHLIN: Well, again, I want to stay out of politics here, but what I had in mind when I said that is not to say that we didn't have some roll in this — quite obviously we did — but that this was a very unique intelligence problem. I can't think in my 30 years of experience in this business of any problem quite like this one.

Typically what we try and do with a society like North Korea, for example, is penetrate it and discover things that people don't know about it.

In this case, for us to have done something differently, we would have had to overturn assumptions and beliefs held by the entire world.

If you look, for example, at an article Ken Pollack wrote in I think it was Atlantic Monthly, he describes a meeting with a number of former U.N. inspectors who when he put the question to them, "Is Iraq enriching in uranium" — 2001 — they all said yes. Some even said they were into calutron work. That goes beyond where our analysts were.

So we had intelligence services, we had experts like that, experts like David Kay, many other experts who were saying during this period — in fact, if we had tried to do a devil's advocacy where you called in outside experts and you say test our analysis, I fear that in this period, the experts we would have called in would have said even more confidently than we did that he had these weapons.

This was a very unique intelligence problem, and I think it's a little difficult to say that one person, one paper, one agency, one advocate drove this in some inexorable way...

WALLACE: It seems...

MCLAUGHLIN: There was a lot of material to debate here.

WALLACE: CIA Directors, acting or not, do not come on Sunday morning talk shows. Why are you talking?

MCLAUGHLIN: What am I doing?

WALLACE: Yes, what are you doing here? Some people will say he's campaigning to be the permanent CIA director. Some people would say you're speaking up for the agency. We're delighted to have you here. How come?

MCLAUGHLIN: Well, there are a lot of reasons. Look, Director Tenet once said, and it stuck with me back in his confirmation hearing, that the cloak of secrecy should never stand in the way of an open and honest dialogue with the American public. And that's part of it.

Part of it is that everyone else is talking about us and saying this about us, and I think it's time for someone like me to step out and say, well, here's what I think and answer questions as best as I can, try to answer them honestly and straightforwardly. And, also, maybe for the American people, put some sort of a face on this mysterious thing called intelligence.

After all, the men and women of the intelligence community are dedicated professionals who risk their lives every day around the world. And one of the dangers at a time like this — we go through these cycles where our successes are briefly noted, then we go into a period where everyone focuses on what are perceived as failures.

And if someone doesn't stand up at a time like this and describe what we're really doing around the world, that we are taking risks that we're putting our lives on the lines that we are dedicated to protecting America the assumption will be that we're flat on our backs and looking at our shoes. And that's just not true.

WALLACE: Mr. Director, thank you. Thanks so much for joining us today.

MCLAUGHLIN: My pleasure.

WALLACE: Appreciate it.