In the film Donnie Brasco, why did the FBI tell the mafia that Donnie was an undercover agent? What am I missing? Why does the FBI seem stupid?
Stupid? Not at all. The FBI tells Sonny Black that Donnie was an agent, to let them know that the FBI can infiltrate them at will. This will create suspicion for every new member going forward, and the whole idea is to break down the walls of trust so they'll rat on each other.
It's actually a quite brilliant move on the FBI's part.