Hoover has been on my mind lately because he's a character in John Birmingham's Axis of Time alternate history trilogy and the movie "Public Enemies." I'd heard rumors about and seen references to his cross-dressing my whole life, but I had never bothered to investigate them for myself until now. So I checked out his Wikipedia page and some other online sources and it seems there is alot of uncertainly as to whether or not he was actually a crossdresser. The main open source for these rumors was sued for libel in another matter and had an axe to grind against the FBI and Hoover. Depending on how good a job Hoover and his cronies did covering-up the details of his life, we may never know for certain one way or the other.
But I can certainly see why the rumors would take hold. Hoover never married yet worked closely with Clyde Tolson (who also never married) and also ate dinner with him almost every night and even vacationed with him--for 40 years. They didn't live together, but that kind of relationship had to raise questions in our more conservative past. It would raise questions these days, although hopefully there would be more acceptance of it.
In my opinion, the big deal about Hoover's sexuality is how it may or may not have affected his job. There were rumors that the Mafia was blackmailing him about it, but that probably never happened. But if Hoover was gay, then I'm sure he was paranoid about the fact becoming public. That's probably why he gathered all that dirt on powerful people--he was practicing his own version of MAD (Mutually Assured Destruction).
If Hoover was spending so much of his time protecting his image and gathering dirt, then I believe he had to have been neglecting other areas of his job and ultimately the security and well-being of the nation. In Birmingham's books, time travelers use their knowledge of the crossdressing rumors and sophisticated eavesdropping tools to expose Hoover's private life. It wasn't because of homophobia, but because Hoover was an implacable political enemy to them and they also believed he wasn't doing a good enough job of protecting American's national security during WWII. So they used a sophisticated "modern" media and political campaign to bring Hoover down and he eventually lost his job and killed himself because of it. I think the same ultimate outcome is probable if any post-WWII President had been willing to weather the resulting political firestorm and fire Hoover.
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On a related note, here's an interesting article about the US's "Don't Ask, Don't Tell" policy and how it compares to the "Openly Serve" policies of our allies:
http://news.yahoo.com/s/ap/20090712/ap_on_re_us/gays_in_the_ranks;_ylt=AgqqwKwl9C5qUzpIMoc6Doys0NUE;_ylu=X3oDMTFoZDI0bXNiBHBvcwMxNARzZWMDYWNjb3JkaW9uX3RvcF9zdG9yaWVzBHNsawNhbGxpZXNzdGFuY2U-