How New Yorkers Cope with Latest Terror Alert ; as Police Presence Grows, Cities Struggle to Balance Security Needs with Personal Freedoms

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Acting on what US intelligence officials consider a "treasure trove" of information, the US is once again hardening its terror defenses - starting with Wall Street and the nation's financial sector.

Yesterday that meant that when stock traders and investment bankers arrived at their offices, police greeted them with automatic weapons, new barricades, and bomb-sniffing dogs. Outside bridges and tunnels, police searched trucks and vans for explosives before they entered Manhattan.

With an election less than four months away, it was a reminder of the dark days of 9/11. But the speed with which officials reacted showed that the nation's ability to respond quickly to new and specific intelligence has improved. At the same time, however, the security ramp-up illustrates that even with improved intelligence, it's difficult to identify the potential terrorists, who police believe have been doing surveillance long enough to get specific information on everything from guard schedules to the blueprints of buildings.

"Americans will have to get used to the fact that these problems will not go away," says Anthony Cordesman, a terrorism expert at the Center for Strategic and International Studies in Washington.

And as threats of terrorism and security responses are expected to become the norm, a major challenge facing officials is how long they should maintain heightened vigilance. That question was tested in October 2002 with the "silent vector" simulation, during which current and former government leaders were given mock intelligence pointing to a terrorist attack on energy facilities along the East Coast, expected to occur within two days.

During the exercise, security measures were put in place, the press coverage caused panic, even some "homes" were evacuated. "[But] there was never an 'attack,' " says Randall Larsen, the CEO of the consulting firm Homeland Security Associates and the former director of the ANSER Institute of Homeland Security. "How do you back down from this heightened alert once you have specific information? To me that's one of the biggest challenges.... It puts elected officials into very difficult positions."

Mr. Larsen says security measures disrupt the flow of cities and leave certain sections less secure. "Sometimes our overreactions can cause more damage to the economy than the actual attacks," he says.

This is a major conundrum for government and businesses alike. "How do companies remain open to their customers but yet provide an environment where you can shop or work safely? …