Allow me to add to that reply.
If the USA was spying on Israel, and this spying was causing the Egyptians to learn about Israeli troop movements, then McNamara could very well have realized that the attack, while a serious affront, was at least justified from the Israeli point of view.
Further, if we in turn attacked Israel, that would have been the defeat of Israel to the Arabs, and Israel was just beginning to become the lynchpin in our containment policy during the cold war. From that vantage point, destroying Israel would have been against our interests.
Yes, we should have intervened to save our men. Yes, we should have shot down the Israeli planes and sank their submarine. I can't really say why we didn't, but I try to think it all the way through. Expediency is sometimes American policy, despite our professions otherwise. Hence, our support of Arafat despite his murder of American diplomats in Khartoum, his order to murder Americans on the Achille Lauro (Mr. Klinghoffer), and his work to murder other Americans in Europe and in Israel.
Here is something else I dug up, the sworn testimony of Commander McGonagle at the Court of Inquiry:
“The boats appeared to be in a wedge type formation with the center boat the lead point of the wedge. Estimated speed of the boats was about 27 to 30 knots. They appeared to be about 150 to 200 yards apart. It appeared that they were approaching the ship in a torpedo launch attitude, and since I did not have direct communication with gun control or the gun mounts, I told a man from the bridge, whose identity I do not recall, to proceed to mount 51 and take the boats under fire. The boats continued to approach the ship at high speed and on a constant bearing with decreasing range. About this time I noticed that our Ensign had been shot away during the air attack and ordered [sic] DAVID, signalman, to hoist a second Ensign from the yardarm... When the boats reached an approximate range of 2,000 yards, the center boat of the formation was signaling [sic] to us. Also, at this range, it appeared that they were flying an Israeli [sic] flag. This was later verified. It was not possible to read the signals from the center torpedo boat because of the intermittent blocking of view by smoke and flames. At this time, I yelled to machinegun 51 to tell him to hold fire. I realized that there was a possibility of the aircraft having been Israeli [sic] and the attack had been conducted in error. I wanted to hold fire to see if we could read the signal from the torpedo boat and perhaps avoid additional damage and personnel injuries. The man on machine gun 51 fired a short burst at the boats before he was able to understand what I was attempting to have him do. Instantly, on machine gun 51 opening fire machine gun 53 began firing at the center boat. From the starboard wing of the bridge, 03 level, I observed that the fire from machine gun 53 was extremely effective and blanketed the area and the center torpedo boat. It was not possible to get to mount 53 from the starboard wing of the bridge. I sent Mr. LUCAS around the port side of the bridge, around to the skylights, to see if he could tell QUINTERO, whom I believed to be the gunner on machine gun 53, to hold fire until we were able to clarify the situation. He reported back in a few minutes in effect that he saw no one at mount 53. As far as the torpedo boats are concerned, I am sure that they felt that they were under fire from USS LIBERTY. At this time, they opened fire with their gun mounts and in a matter of seconds, one torpedo was noted crossing astern of the ship at about 25 yards. The time that this torpedo crossed the stern is believed to be about 1426. About 1427, without advance warning, the ship sustained a torpedo hit starboard side forward.”
So, it appears that even if the air attack was a mistake, by the time such a mistake was realized, the return fire from the Liberty upon the Israel gunboats forced the the Israelis to launch torpedos.
Just a theory, mind you... I don't know all the facts. Anyway, the testimony is now presented on this thread for those who are interested.