The signs that the special role for the Peace Corps in foreign aid was in trouble were all over Washington. Wofford ran into Ralph Dungan in the White House mess (Wofford was then a Special Assistant to the President on Civil Rights) and Dungan told him the Peace Corps would be a subdivision of the new AID. “Not if Sarge has anything to say about it,” Wofford tossed off, half joking, but also firmly believing Shriver walked on water.
The truth was that all these “new guys” Shriver brought in to work for the Peace Corps believed Sarge could get anything he wanted from the White House. But Shriver was scheduled to leave D.C. and the U.S. Who would carry the fight that was developing in D.C.?
Before leaving for his ’round the world trip to secure placements for PCVs, Shriver lobbied Sorensen, Dungan, and Labouisse, trying to persuade them of the absolute necessity of having an “independent” Peace Corps. Shriver also wrote Vice-President Johnson and sent a memo to JFK saying that it would be a “political mistake” for the Peace Corps to be “one of the categories of assistance in the new foreign aid bill.”
Kennedy was also “out of the loop” and did not chair the April 26th meeting. (At the time he was dealing with the repercussions of the Bay of Pigs fiasco.) Ralph Dungan step in to chair the AID meeting and Dungan, Labouisse, and David  Bell, director of then Bureau of the Budget, all recommended that the Peace Corps should be a subdivision of AID.
Representing the Peace Corps at this White House meeting were Wiggins and Josephson. They argued against this “bureaucratic tidiness” favored by Kennedy’s aides. Josephson took extensive notes, and immediately afterward, Wiggins cabled Shriver who by then had reached India. Wiggins’ message read: “Peace Corps not, repeat not, to have autonomy. Dungan describes  himself as acting on behalf of the President.”
Like Labouisse, Dungan believed that the Peace Corps should be part of AID and that the President need not be troubled by the “arguments of amateurs,” as Rice puts it in his book.
According to Rice in The Bold Experiment Wiggins and Josephson suspected that Dungan had not been objective. “There was some evidence that he had intercepted Shriver’s memorandum to the President and had prevented it from reaching him.”
But Dungandidn’t know who he was dealing with in Shriver and these ‘new guys’ in town. Wofford was right. Shriverwasn’t giving up in this fight with the presidential assistants over ‘turf.’
From India, Shriver cabled Wiggins and told him to ask Vice-President Johnson if he would intercedon behalf of the Peace Corps. He told Wiggins to get in touch with Bill Moyers, then Johnson’s aide. “Moyers took on the crucial role here,” writes Rice. At the time, Bill Moyers was only twenty-four, but Johnson’s key aide, and Moyers loved the Peace Corps, in fact, he would soon leave Johnson’s VP Office to work at the Peace Corps, taking a low-ranking job as Associate Director.
Johnson called Kennedy and asked for a private meeting. This was on May 1, 1961. As Bill Josephson later described it, and as reported by Gerard Rice, “Johnson, on his way to the Oval Office, picked up Henry Labouise and Dave Bell by their respective ears and began telling them what the foreign aid program really should do.”
No formal record was kept of the conversation between Kennedy and Johnson. Warren Wiggins told me in my 1997 interview, “by force of personality (not logic) Johnson cajoled the President into overturning a unanimous decision of his newly appointed staff, including the heads of the Bureau of Budget, the Department of State, the Foreign Aid Administration and the Civil Service Commission.”
Thanks to Johnson, Kennedy reversed this decision and gave the Peace Corps independence. Shriver would declared Lyndon Johnson “a founding father of the Peace Corps.”
Later Moyers ran into Dungan in the White House. Dungangreeted him with a wry smile and said, “Well, you sons of bitches won.” Dungan did not like the front-page headline in the New York Times: “Peace Corps Wins Fight for Autonomy.”
Somehow, the whole story of the Peace Corps’ battle for independence had been leaked to the press, much to the embarrassment of Labouisse, Dungan, and other Kennedy aides. This story, written by Peter Braestrup, summed up, “For Peace Corps officials, it was an important victory.” Wofford called it the “the biggest early decision” in Peace Corps history. According to Wiggins, “It is very doubtful if anything like the Peace Corps as we know it would have emerged if it wasn’t for Kennedy’s decision.”
Scott Stossel in his book Sarge: The Life and Times of Sargent Shriverwrites how Dungan was furious at the “hotshots in the Peace Corps” who had outfoxed him.
Bill Josephson later recalled, “Ralph Dungan called me and said we were on our own [as an agency]. I said, ‘Would you like to come over and talk about this? We’re going to be working together for a long time.’ And Ralph said, ‘Absolutely not. You are on your own. Don’t ever come here asking for help.’
If the Peace Corps wasn’t going to play by the rules established by the White House staff or by AID, then it shouldn’t expect to get any assistance or sympathy from Ralph Dungan or anyone else at AID. The Peace Corps had its independence; it would have to sink or swim on its own.
Well, the Peace Corps has been swimming very nicely ever since, thank you.