CIA director George Tenet has predicted it will take "another five years of work to have the kind of clandestine service our country needs" to combat al-Qaida and other threats.
"The same can be said for the National Security Agency, our imagery agency and our analytic community," Tenet testified on Wednesday before the commission investigating 11 September attacks on the US.
He said a series of tight budgets dating to the end of the Cold War meant that by the mid-1990s, intelligence agencies had "lost close to 25% of our people and billions of dollars in capital investment".
A needed transformation is underway, he said, and appealed for a long-term commitment in funding. "Our investments in capability must be sustained," he added.
Tenet's appearance was ironic to the core. Several commissioners lavished praise on him for his foresight and efforts to restructure intelligence-gathering.
Yet, the panel's staff issued a report as the hearing opened that was sharply critical of the agency and apparatus he has lead for seven years as the US's director of central intelligence.
"While we now know that al-Qaida was formed in 1988, at the end of the Soviet occupation of Afghanistan, the intelligence community did not describe this organisation, at least in the documents we have seen, until 1999," the report said.
As late as 1997, it said, the CIA Counter-Terrorism Centre "characterised Usama bin Laden as a financier of terrorism".
At the same time, though, the report said intelligence had recently received information revealing that bin Ladin "head its own terrorist organisation", and had been involved in a number of attacks.
These included one at a Yemen hotel where US military personnel were quartered in 1992; the shooting down of Army helicopters in Somalia in 1993; and possibly the 1995 bombing of an American training mission to the Saudi Arabian National Guard.
It also noted several "threat reports" produced by the intelligence apparatus had "mentioned the possibility of using an aircraft laden with explosives", such as the ones used on 11 September in attacks that killed nearly 3000 people.
"We all understood (Usama) bin Ladin's intent to strike the homeland but were unable to translate this knowledge into an effective defense of the country."
"Of these, the most prominent asserted a possible plot to fly an explosives-laden aircraft into a US city," it said. Others included reports of a plan to fly a plane into the Eiffel Tower in 1994, and of flying a plane into CIA headquarters.
Yet, the counter terrorist centre "did not analyse how a hijacked aircraft or other explosives-laden aircraft might be used as a weapon," the report said.
If it had, "it could have identified that a critical obstacle would be to find a suicide terrorist able to fly a large jet aircraft".
Questioned by former Rep Tim Roemer, Tenet said he did not speak with President George Bush during August, 2001, a period marked by concern over possible attacks.
"He was on vacation and I was here," Tenet said, although he also added that he could have picked up the phone and called the president at any time if he had felt a need to do so.
Readily acknowledging that intelligence agencies "never penetrated the 9/11 plot", Tenet said, "We all understood (Usama) bin Ladin's intent to strike the homeland but were unable to translate this knowledge into an effective defence of the country."