The Office of Strategic Services (OSS) was created by President Franklin D. Roosevelt in July 1942. The OSS replaced the former American intelligence system, Office of the Coordinator of Information (OCI) that was considered to be ineffective. Roosevelt selected Colonel William Donovan as the first director of the organization, who had spent some time studying the Special Operations Executive (SOE), an organization set up by the British government in July 1940. He was also influenced by William Stephenson, the head of the British Security Coordination (BSC). Senior figures in the OSS included George K. Bowen, the head of Special Activities, David Bruce (head of intelligence), William Lane Rehm (head of finance) and Allen Dulles (head of the New York office).
Donald Chase Downes worked with Arthur Goldberg on the Labor Desk. "We were a fortunate combination, able to work together at high speed without friction. Our ideas, our plans, our points of view almost perfectly meshed; our abilities were peculiarly supplementary; our work so mutually understood and developed that each was able at any time to carry on or make a decision for the others." They recruited refugee German trade union leaders who had fled from Nazi Germany. Others who joined included Leon Jouhaux from France and Omar Becu from Belgium.
Downes also persuaded Dr. Paul Schwarz (1882-1951), the former German Consul-General in New York City, to supply the OSS with information. Downes argued that Schwarz "began to spill the German beans - scandals, indiscretions, skeletons... In his forty years in the German foreign service, he had kept elaborate notes... This information he kept in huge filing cases, where there was all the gossip and facts about everyone of importance in German diplomatic and military circles for nearly half a century." Another informant was Ernst Hanfstaengel who had been a close friend of Adolf Hitler until he had fallen out with Joseph Goebbels in 1937. He later was used by Franklin D. Roosevelt as a "political and psychological warfare adviser in the war against Germany."
The OSS had responsibility for collecting and analyzing information about countries at war with the United States. It also helped to organize guerrilla fighting, sabotage and espionage. Some senior US military figures disapproved of the OSS and General Douglas MacArthur refused to allow the organization to operate in the Philippines.
William Donovan was given the rank of major general and during the Second World War he built up a team of 16,000 agents working behind enemy lines. The growth of the OSS brought conflict with John Edgar Hoover who saw it as a rival to the Federal Bureau of Investigation.
The OSS was disbanded in October 1945 and was eventually replaced by the Central Intelligence Agency (CIA).