(CNN) -- The nation's spy chiefs and their congressional overseers acknowledged Tuesday that changes must be made to the way intelligence is collected, but largely defended the work of the intelligence community as key to safeguarding the nation from terrorists.
Tuesday's hearing, billed as a discussion of potential changes to the Foreign Intelligence Surveillance Act, comes amid claims, reported last week by the German magazine Der Spiegel, that the NSA monitored German Chancellor Angela Merkel's cell phone.
It was the latest in a series of allegations that stem from disclosures given to news organizations by Edward Snowden, the former NSA contractor who describes himself as a whistle-blower.
Comments by President Barack Obama's administration asserting that he did not know of the practice until recently have drawn criticism from both the right and the left.
Recent assertions by European media outlets that the NSA tapped tens of millions of phone calls in Europe are "completely false," NSA chief Gen. Keith Alexander told the committee.
Alexander said the media outlets misinterpreted documents that were leaked. He said the NSA legally collected metadata from some phone calls, and the rest of the metadata came from U.S. allies.
"To be perfectly clear, this is not information that we collected on European citizens. It represents information that we, and our NATO allies, have collected in defense of our countries and in support of military operations," Alexander said.
Alexander vigorously defended the agency's intelligence gathering activities, saying it has saved lives "not only here but in Europe and around the world."
In his remarks, Director of National Intelligence James Clapper said that trying to determine the intentions of foreign leaders -- by getting close to them or getting their communications -- is a "fundamental given" among intelligence services, and one of the first things he learned in his 50-year intelligence career.
Asked if he believes U.S. allies conducted espionage activities against U.S. leaders, he said, "Absolutely." Clapper was responding to questions from House Intelligence Committee Chairman Mike Rogers.
But FISA "must be reformed" to improve transparency about and restore the public's confidence in the United States' intelligence gathering activities, House Intelligence Committee ranking member Dutch Ruppersberger, D-Maryland, said.
"We must improve transparency, privacy protections and thereby restore the public's confidence."
Yet, the reforms must preserve the intelligence community's abilities to help protect the nation, he said.
"It's important that we not forget that these men and women are doing what we have told them to do -- within the confines of the laws of the United States of America that we passed -- and doing so to keep us safe," he said.
"I shudder to think what connections will be missed if the program were completely eliminated," he said.
Snowden's revelations about U.S. intelligence-gathering activities have been "extremely damaging," Clapper said in his opening remarks.
But, he added, the activities themselves have been lawful, and "rigorous oversight" has been effective.
Ruppersberger said authorities were considering a proposal to require a declassification review of any FISA Court decision order or opinion "to improve transparency without threatening sources and methods."
The FISA Court grants or refuses surveillance rights requests from U.S. government agencies.
Also under consideration: allowing all members of Congress to review classified reporting about surveillance programs; appointing an inspector general of the NSA to provide an extra, independent check; changing the makeup of the FISA court "to correct the perception that it's controlled by one political party or another;" creating the job of privacy advocate -- that would be filled by a lawyer outside of the executive branch who would take an independent position on matters before the FISA court "that involve significant constructions or interpretations of the FISA law."
One of the most intriguing, but challenging changes being discussed involves moving away from bulk collection of data toward a system like the one used in criminal prosecutions, where the government subpoenas individual call data records -- phone numbers, not conversations -- to be used for link analysis, the lawmaker said.
Clapper defended the surveillance programs as beneficial. "What we do not do is spy unlawfully on Americans or, for that matter, spy indiscriminately on the citizens of any country," he said. "We do not spy on anyone except for valid foreign intelligence purposes and we only work within the law. Now, to be sure, on occasion, we've made mistakes -- some quite significant.
"But these are usually caused by human error or technical problems and, whenever we have found mistakes, we've reported, addressed and corrected them."
NSA Director Alexander said that of the billions of records of personal data collected last year
by the agency, just 288 of them were reviewed.
And technical safeguards exist to ensure that the data are not available to non-authorized personnel, he said.
Only 22 people at NSA are authorized to look at certain phone numbers, he said, and about 30 are authorized to look into the database that contains those numbers.
Referring to the unauthorized release of documents about the NSA's activities, he said, "Nothing that has been released has shown that we are trying to do something illegal or unprofessional; when we find a mistake, a compliance issue, we report it to this committee, to all our overseers, and we correct it."
The hearing comes a day after Germany's interior minister said that his country's confidence in the United States is shaken, amid claims the NSA monitored Merkel's cell phone.
"If the Americans intercepted cell phones in Germany, they broke German law on German soil," Interior Minister Hans-Peter Friedrich told the Bild am Sonntag newspaper, adding that he wants "complete information on all accusations."
"The confidence in our ally, U.S.A., is shaken," Friedrich said, according to Bild am Sonntag.
Citing an unnamed intelligence officer, the German newspaper reported Sunday that U.S. President Barack Obama learned about the NSA operation targeting Merkel from agency chief Alexander in 2010 and allowed it to continue -- an assertion that the NSA denied.
"Gen. Alexander did not discuss with President Obama in 2010 an alleged foreign intelligence operation involving German Chancellor Merkel, nor has he ever discussed alleged operations involving Chancellor Merkel," NSA spokeswoman Vanee' Vines told CNN.
Der Spiegel, meanwhile, reported that Obama told Merkel he would have stopped it from happening if he had known about it.
Such reassurances appear to have done little to quell outrage from German officials about the alleged espionage.
The magazine's report, which cites a secret U.S. intelligence file, said Merkel's phone had been monitored for more than 10 years, antedating her current post.
The same Snowden database indicated the United States was spying on others in Berlin's political district, at least until Obama visited Berlin this year, Der Spiegel reported.
Asked about the assertions, U.S. National Security Council spokeswoman Caitlin Hayden said her agency does not "comment publicly on every specific intelligence activity."
"And, as a matter of policy, we have made clear that the United States gathers foreign intelligence of the type gathered by all nations," said Hayden, echoing comments she and others have made in recent days.
In his testimony Tuesday, Clapper noted that he had ordered the declassification of a series of documents in recent months to inform the public debate on the matter, and would continue to do so.
"These documents let our citizens see the seriousness, the thoughtfulness and the rigor with which the FISA court exercises its responsibilities," he said, adding that the NSA comprises "honorable people."
Though changes must be made, he urged lawmakers to "remain mindful of the potential long-term impact of overcorrecting." Most of the documents released by Clapper date to 2009, when the administration was pushing lawmakers to reauthorize sections of the Patriot Act that were set to expire.
One document from 2011 notifies the House and Senate intelligence and judiciary committees of the NSA's testing in 2010-11 of a program to collect cell phone tower data that could track mobile phone users. The NSA this month said it tested such collection, but discontinued it.
The document released Monday said the Justice Department prepared a memorandum authorizing the program, which the document said fell legally within guidelines of another program under Section 215 of the Patriot Act.
"It appears that the NSA embarked on an effort to track Americans' movements in bulk without even seeking explicit approval from the FISA court beforehand," said Alex Abdo, an attorney with the American Civil Liberties Union's National Security Project. "That is hardly the robust judicial oversight the government has repeatedly promised. To the contrary, it is further evidence that Congress should rein in NSA spying on innocent Americans and put an end to mass collection of our private information."
Another 2011 document is the NSA's notification to the Senate and House judiciary committees about a program carried out under Section 501 of the Foreign Intelligence Surveillance Act to collect mobile phone data, known as metadata, that includes the numbers called and date, time and length of calls.
The collection began in 2006 and matched the NSA's collection of land line telephone data.
Most of the newly declassified documents describe the aggressive push by the NSA, FBI and the Justice Department for lawmakers to save the bulk telephone data collection effort, known as the 215 program, because it was important for their efforts to thwart terrorist threats.
At the same time, lawmakers were urged not
to discuss the classified program for fear it would hurt national security, the documents say.
This year, after Snowden released the cache of classified documents, including court orders detailing the 215 bulk data program, many lawmakers said they were shocked about the extent of the program.
On Tuesday, Clapper said he wasn't buying their reactions. "It reminds me of 'Casablanca,' " Clapper said, referring to the movie from the 1940s. "My God, there's gambling going on here."
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