The shadowy warning could have easily been swallowed up in the flow of hundreds of crank calls and sketchy leads about airport attacks and bombs on bridges that flooded government hotlines that year. But this call was different: Al named a place, and a date.

Los Angeles, next Thursday, the 29th, Al said. A shopping mall near the Federal Building on Wilshire Boulevard and the close-by campus of UCLA. Al said that a cell of three terrorists would enter the country from Canada. He even gave names. This didn't sound like a crank. Could it be for real? Could this be the one?

Forget about what you think homeland security really means. For now, put aside thoughts of stripping down at airport security checks. Never mind those seemingly random spikes in the color-coded national threat level -- and whatever happened to those alerts, anyway? From a city's point of view, where distinguishing hoax from horror can turn on a single phone call, this is how you fight a war on terrorism.

Officials in Washington immediately called L.A.'s Joint Terrorism Task Force, a team of FBI agents, Homeland Security officials, and local police and sheriff's officers. The FBI set up dozens of these task forces in cities across the country after 9/11, and they quickly became magnets for bureaucratic turf tussles. But in L.A., partly owing to a long history of cooperating on anti-gang and drug squads, the local cops and the feds got along well.

After getting Washington's call about Al, the FBI set up a team within the task force to vet incoming tips, including other bomb threats. The police department's terrorism analysts canceled their weekend plans. Unnoticed in the hustle and flow of city life, L.A. went into terror mode.

At least two big malls were near the Federal Building and UCLA. On busy West Pico Boulevard was the Westside Pavilion, with more than 160 stores. Over in the Fairfax District, a historically Jewish neighborhood, the fashionable outdoor plaza called the Grove beckoned shoppers and moviegoers to its stores and cinemas. Before the Los Angeles Police Department and the mayor told thousands of Angelinos to stay away from these two sites, the authorities needed to know what they were up against.

FBI agents traced Al's call to a prepaid phone card. They tracked down the card seller, who gave agents a log of Al's calls. It turned out that his real name was Zameer Mohamed and that he had called in the bomb threat from Room 308 of a Comfort Inn in Calgary.

Hotel management told agents that a Samier Hussein had rented the room. Authorities ran the name and got a hit in federal records: Mohamed had used Hussein as an alias in Texas, where officials had investigated him the year before on a theft charge. Was Mohamed changing names to cover his tracks? That would have helped him if he wanted to evade U.S. authorities or the Qaeda members he had ostensibly just ratted out.

Life Goes On

Meanwhile, in Los Angeles, local authorities were analyzing the bomb threat. The city's top terrorism officials were seasoned experts. John Miller, the head of the LAPD's counter-terrorism operation at the time, was a former journalist with deep ties to the FBI. He was also the last Western reporter to interview Osama bin Laden before 9/11.

The department's chief, William Bratton, was perhaps the most famous cop in America. He was appointed New York City's police commissioner a year after the 1993 World Trade Center bombing, and he led a dramatic reduction in crime citywide. Miller was Bratton's spokesman then. The two were plugged in to those who knew the national threat picture.

No one in Washington had said it publicly yet, but even as Mohamed made his call in April 2004, multiple and credible sources had convinced counter-terrorism officials that Al Qaeda was planning a major attack in the United States. The "chatter" about a strike was at its highest level since 9/11, intelligence agencies calculated.

A month earlier, coordinated bombings on commuter trains in Madrid had killed 191 people. Some senior officials believed that Al Qaeda struck Spain in an effort to turn popular support against the conservative government, which backed the war in Iraq and was up for re-election.

The Americans thought that the terrorists might try something similar in the United States, possibly with attacks at the upcoming national political conventions. Senior officials also feared the possibility of strikes aimed at the Group of Eight summit in Sea Island, Ga., and even the opening of the World War II Memorial in Washington.

There had also been worried talk about a dirty bomb. Specifically, intelligence and diplomatic officials had homed in on three Qaeda operatives who had overseen experiments to build explosives containing radioactive material or deadly chemicals. America was bracing for a hit. In that anxious atmosphere, how could anyone ignore Mohamed's tip that three terrorists were about to go after L.A.?

On Wednesday, the day before the threatened attack, city officials informed the shopping mall owners. On Thursday, Bratton stood before news cameras at the Grove and asked Angelinos for help. "We need the eyes, the ears" of the citizenry, he stressed. He reminded people that bin Laden had recently issued another taped warning promising more violence.

Then-Mayor James Hahn said that people should go about their daily business but should be alert to the out-of-place: "a truck that seems to be parked somewhere for too long, or someone ... wearing bulky clothing on a hot day."

Police stepped up patrols around the two malls and across West Los Angeles. News helicopters whirled above the supposed targets. But by Friday, everything seemed back to normal. Shoppers trolled the window fronts, while L.A. traffic flowed as usual. Nearby, a movie crew erected the set for a day's shooting.

"This just happens all the time.... This is no different than any anonymous bomb threat that gets called in," Gene Thompson, the head of corporate security for the Westside Pavilion's owners, told a reporter for the Los Angeles Times. "Life goes on," said Tom Miles, the Grove's general manager.

In fact, life did go on, unimpeded by a bomb or any other shopping disruptions. On the day Mohamed had warned that his Qaeda friends would strike, federal authorities apprehended him as he crossed the U.S.-Canadian border into Montana.

Mohamed confessed that he'd made the whole thing up. There was no bomb. Those supposed Qaeda operatives were actually friends of his girlfriend. Mohamed had called Homeland Security to get back at her for stealing his paycheck from a Toronto bank where they used to work together. He had asked the three men to help him get the money back, but they had refused. Mohamed said he picked the two malls because he knew the area, having once visited the UCLA Law Library.

Life went on. But the city never really slept.

The Listening Post

Mohamed's unusually specific threat inspired a rare frenzy of activity. To be sure, Los Angeles doesn't ramp up to full alert for every lead that comes over the transom. That would be impossible, because, by officials' count, they have received more than 4,000 tips, leads, and other vague insinuations about possible terrorist attacks in the greater L.A. area in just the past three years.

Most of them turn out to be bogus. Anonymous callers see "Arabs" taking photographs of bridges. Electrical plant owners notice a van driving slowly by their security gates. Some concerned citizen sees "Middle Eastern-looking" men loading fertilizer onto a truck in her neighbor's driveway. Authorities have documented literally thousands of such leads in cities across the country, and few of them come to anything. The camera-toting terrorists are actually tourists; the driver of the van was lost; the men loading fertilizer were Mexican gardeners.

Occasionally, of course, the leads are more substantial and are worth investigating. Some are sourced to U.S. intelligence agencies or to the Homeland Security Department, which is nominally tasked with keeping states and localities abreast of threats to their areas. But the river of leads pouring into L.A. contains mostly unofficial reports from locals, and they run the gamut from the useful to the useless. At such a dizzying pace -- 4,000 in three years -- how could anyone keep up?

Today, in L.A. and in more than four dozen other cities across the country, state and local officials, using mostly federal grant money, have built a network of lead-vetting teams to do just that. They call them "fusion centers," and Bush administration officials, along with powerful members of Congress in both parties, believe that they are one of the best ways to prevent the next attack.

Usually run in partnership with federal agencies, such as the FBI and Homeland Security, fusion centers employ teams of terrorism analysts, many of whom are self-educated. They take every lead, hold it up to the light, and ask, Could this be connected to terrorism? To answer that question, the leads are examined using a wealth of other information, including analysts' own expertise, local police reports, statewide crime databases, and sometimes intelligence from the federal level. "Fused" together, all that analysis tells police and security agencies whether they should rest easy or call out the guard.

In L.A., a city that makes its living spinning fact into fiction -- the buttoned-down terrorism analyst has morphed into Jack Bauer, terrorist-fighting force of nature on "24" -- you might expect the fusion center to pulse at the city's heart. Wrong. To get to the lead-filtering complex -- called the Joint Regional Intelligence Center, or "Jay-Rick" -- you have to leave the beauty bars of the Sunset Strip and the curvy overlooks of the Hollywood Hills. Go south about 10 miles, take the 105 freeway east until it ends, then head down an industrial road, past a taco stand, a carwash, and a movie theater.

There, amid a warren of stout office buildings in the industrial L.A. suburb of Norwalk, is a sand-colored 525,000-square-foot edifice. JRIC is on the seventh floor, next to the corporate headquarters of Bally Total Fitness. This is homeland security's next frontier.

JRIC is L.A.'s terrorism "listening post," says Stephen Tidwell, the assistant director in charge of the FBI's Los Angeles field office. Tidwell, LAPD's Bratton, and L.A. County Sheriff Leroy Baca are among JRIC's most enthusiastic supporters. The three men are friends and self-professed true believers in chasing terrorists down at the local level. Their comradeship has caught Washington's attention. When JRIC opened last summer, Homeland Security Secretary Michael Chertoff came out for the ribbon-cutting. Federal officials call JRIC a "model fusion center," one for others to emulate.

JRIC's roster is a bureaucratic potpourri. It contains FBI agents, LAPD officers, L.A. County sheriff's deputies, public health experts, contract analysts who study radical Islam, a liaison from the Homeland Security Department, and officers detailed from other local law enforcement agencies across the Los Angeles region.

The "region" is a seven-county, 44,000-square-mile sprawl that, historically, has never much cared for jurisdictional spats. As any L.A. cop, firefighter, or paramedic will attest, during an earthquake, fire, or a flood -- all of which the region suffers every year -- you don't much care what color uniform the person coming to your rescue wears. The region adheres to a pact of "mutual aid," which all but eliminates turf tensions. Cooperatively fighting terrorism fits right in with that culture.

Dead Ends

At 9 a.m. every Monday through Friday, the JRIC staff sits down and sorts through the daily cache of leads, to make sure that they're vetted and that all agencies are on the same page. If there's a report that terrorists are spiking the water supply with biotoxins, JRIC will ask a microbiologist to take a look. How credible is the threat? Could that toxin actually live in water? How many people might be affected?

If there's a call about suspicious activity in Long Beach, the appropriate JRIC officer will run it past his sources. Some have likened the hunt for terrorists to looking for a needle in a haystack. But JRIC members go through haystacks, straw by straw, asking, "Could this be a needle?"

So far, none of the leads has revealed an active terrorist conspiracy in the L.A. region. "Ninety-nine-point-nine percent are false," says Bob Galarneau, a sheriff's department lieutenant and a JRIC program manager. "But we still investigate.... Every one is followed up on."

Considering the gravity of the potential threat, one might expect daily life at JRIC to resemble a scene out of a Tom Clancy movie. Wrong again. There are trappings of adventure -- wall-mounted televisions tuned to cable news channels, including Al Jazeera; table tops strewn with copies of Counterterrorism magazine. Beyond that, JRIC looks like just another banal workplace. If this were a TV show, it would be "24" meets "The Office."

But that is what homeland security looks like. A lot of waiting, a lot of wading through noise, and then life goes on, in all its reassuring regularity.

"I wish it were like '24,'" says Kristen von KleinSmid, the FBI supervisory special agent in charge of the threat squad, a JRIC team that can decide to open investigations on particular leads. "I can't redirect satellites. I'm sure there's someone who can. But I just can't make a phone call and have it done."

The threat squad, also called CT-6, worked the 2004 bomb threat on the shopping malls. Today it comprises about 20 analysts and officers from a variety of federal and local agencies. The squad is permanently attached to the fusion center and has "right of first refusal" on all incoming leads. Von KleinSmid says that it handles, on average, about 25 tips a week. "You have to be very organized," she says. "It's hard to keep the leads straight."

As leads go, CT-6 has a low bar. "The only ones we won't work are if we know the person who wrote this complaint is completely crazy," von KleinSmid says -- if the person rambles, or if "it's just some woman saying she saw two Middle Eastern men taking photos of a building." Those tips have no "lead value," she continues, meaning they're dead ends. It's "common," von KleinSmid says, for people to anonymously file complaints about their neighbors.

"Most of the leads are dead ends," Sheriff Baca says. "It's well-meaning information from people who don't know exactly what they're talking about."

Distractions and hoaxes come with the job, but officials are also trying to dissuade future cranks. In one case, officials say, the threat squad responded to a complaint from a military contractor who claimed that his Filipino girlfriend had stolen plans for a shoulder-fired missile and intended to sell them to Abu Sayyaf, a terrorist network based in the Philippines.

CT-6 investigated, and officers tracked down the woman, who, it turned out, was in the country illegally. She and her boyfriend had recently fought, and to get back at her, he reported her as a terrorist supporter, hoping she would be deported. The U.S. attorney's office is prosecuting him for making false claims, officials say.

"About one out of every 100 leads, there's something good that comes out of that, where really useful information is obtained," von KleinSmid says. Agents "know that a lot of the stuff they're working isn't going to go anywhere."

Which makes one wonder: If nothing will come of most -- nearly all -- of the leads that have poured into L.A. over the years, why bother chasing down each one? Because, officials say, chasing ghosts and possible hoaxes is the best chance they have of finding a bona fide threat. One time out of thousands, the lead might bear fruit. The terrorist hunters might get lucky. In fact, they say, it has already happened.

Terror Comes to Town

In the summer of 2005, police officers in Torrance, south of downtown L.A., investigated an armed robbery at a gas station. It was the latest in a string of heists, and each time the bandits had fled without a trace. But this time one of them dropped his cellphone, giving police a rare lead.

Officers traced the phone to Gregory Vernon Patterson, a 21-year-old local man with no criminal record. They placed him under surveillance. According to a criminal complaint, on the evening of July 5, Patterson and Levar Haney Washington, who, later investigations showed, was an L.A. gang member, drove to a gas station in Fullerton, east of Torrance in Orange County.

Washington, dressed in a dark hooded sweatshirt and carrying a shotgun, robbed the clerk, according to the complaint. Police arrested the two men and then searched Washington's apartment in South Los Angeles.

That search, authorities say, ultimately enabled them to disrupt a major terrorist plot aimed at local military recruiting stations, the Israeli consulate, and other targets across L.A. Torrance police officers found documents outlining an imminent attack, possibly timed for the anniversary of September 11, as well as knives, bulletproof vests, and "jihadist" material that wasn't available from the usual sources on the Internet, investigators said.

Almost immediately, one of the officers involved in the search, who had been trained to spot terrorist warning signs in the course of his normal duties, called local counter-terrorism officials. The entire L.A. terrorist hunting apparatus was on alert again.

More than 200 federal and local investigators worked the case, pursuing leads, tracking evidence, and grilling Washington and Patterson. "Virtually every agency in the area jumped on the hunt," says Tidwell, the FBI assistant director in charge. "It was textbook."

According to an FBI affidavit, Washington told investigators that he led an "Islamic council" that was planning a jihad in the United States, "to respond to the oppression of Muslims in Iraq and Afghanistan by the U.S. government."

Washington said that his group had scouted targets, to determine whether they should use a bomb or "rifles and inflict as many casualties as possible." Patterson, the affidavit said, had purchased an AR-15 assault rifle and was only days from picking it up at a sporting goods store. Investigators charged that the men committed the gas-station robberies to pay for their citywide offensive. Planning for the attacks, the FBI said that Washington told them, was nearly complete.

Officials later charged that Washington and Patterson acted at the behest of Kevin Lamar James, a Muslim convert doing time in Folsom prison since 1996 for armed robbery in gang-related crimes. Police said that James had founded a radical Islamic cell called Jamiyyat Ul Islam Is Saheeh, or JIS -- "the Association of True Islam," -- and, from inside Folsom's walls, directed a plot to conduct a violent jihad.

Federal officials had warned about the spread of Islamic radicalism in prisons. Local authorities said that Washington and Patterson had met at an area mosque, and had become radicalized by James's vision. On August 31, 2005, a federal grand jury indicted the three men, along with a Pakistani national, on charges of plotting the L.A. attacks. A trial is scheduled for August.

Ask any of the terrorist hunters in L.A. to cite a plot they've disrupted as a result of their post-9/11 vigilance, and they'll immediately point to JIS. To this day, the FBI calls the incident the closest thing to an "operational" terrorist plot since the September 11 attacks.

Miller, the former LAPD counter-terrorism official who is now the FBI's chief spokesman, has called JIS a "homegrown" terrorist cell. He said that it "is the best example of how the threat now is as much out there on our streets, among some disaffected Americans, as it is teams of sleeper cells who are sent from faraway training camps."

Before 9/11, officials in L.A. agree, the police officers who searched Washington's apartment might have been alarmed by the weaponry and the jihadist literature but wouldn't have known to immediately call the terrorism task force. The JIS case is proof, they say, that the relentless pursuit of leads, the hyper-alertness, the constant probing of every piece of evidence for a terrorist link, actually prevents attacks.

Many terrorism experts, however, aren't so sure. If the evidence is correct, then Washington and Patterson were clearly capable of violence, and very well may have attacked targets in the city. But is it accurate to call them domestic terrorists, members of a homegrown cell?

The case demands comparisons to bona fide homegrown extremists, such as those involved in the London subway and bus bombings in 2005, which killed 52 people. Is JIS the same? Are L.A. terrorist hunters, so intent on turning over every rock, seeing threats where they don't exist?

Seeing Things

Since 9/11, the FBI and local law enforcement have produced few cases of legitimate terrorism, critics say. Miller said recently that the bureau "has had a part in stopping five terrorist plots in progress" in the past year and a half. Among those, he counts the foiled attempt last year to bomb commercial airliners in midflight on their way from England to the United States.

But Miller also includes a plot to blow up a New York City commuter rail line, which investigators have said involved suspects who were never in the United States; the arrest of members of a suspected terrorist cell in Canada who aimed to blow up government buildings there; the arrest of two men in Georgia who the FBI says were linked to the Canadian group and who also discussed attacks on oil refineries and military bases; and the arrest of members of a suspected terrorist group in Florida called "the Seas of David" who officials say wanted to blow up the Sears Tower in Chicago.

Terrorism experts hotly debate whether those four cases and others, including JIS in Los Angeles, can or should be called examples of domestic terrorist cells. Tom Kean, the former co-chairman of the 9/11 commission, has dismissed the comparison of JIS to Al Qaeda.

JIS, he said, is part of a long history of anarchists and disaffected groups that have wanted to harm the government. Al Qaeda, on the other hand, is a worldwide organization that has declared its intention to harm Americans and has the personnel and financial capabilities to do it, Kean said. "That is the enemy," he told the PBS series "Frontlin" last year. "And that is who we're fighting, and we've got to always keep our focus on that."

Amy Zegart, an associate professor of public policy at UCLA and a leading national authority on counter-terrorism, says that officials are too quick to label as terrorists groups that express some outrage at the government. "When you parade things that clearly aren't at the level of 9/11 as successes, you undermine the FBI's credibility with the public," she says.

Zegart is a prominent FBI skeptic. After she wrote a scathing op-ed in the Los Angeles Times last year in which she said that the FBI was "still stupid" about terrorism, Tidwell called her to his office for a dressing down.

Still, after examining the city's terrorist-hunting efforts, including JRIC, Zegart says that there's some reason to take heart. "They have a very forward-thinking approach," she said.

JRIC, for instance, built upon the work of another outfit, the Terrorism Early Warning Group, created in 1996 by the L.A. County Sheriff's Department. Experts have lauded the group and the city's leaders for taking local responsibility for terrorism prevention seriously years before national agencies made it a priority.

But there's a flip side to the city's ceaseless pursuit, Zegart says.

"What worries me about the follow-every-lead approach is that it is done in a strategic void. I think this is an endemic problem that is true across U.S. intelligence. We're ramping up ... saying, 'Let's look at today's threat list,' " Zegart says. "The current news cycle and the terrorist threat are putting more pressure on people to focus on the here and now."

As a result, counter-terrorism officials might miss the bigger, longer-range picture about terrorism trends, and overlook new threats that could be emerging below the daily radar sweep, she fears.

Zegart says she believes that the threat of domestic terrorism is real. Nevertheless, she's unconvinced that other cities should try to emulate L.A.'s approach. "In many ways, we've been the model in terms of prevention and response," she says. "I always say that the good news and the bad news is, L.A. leads the country in counter-terrorism."

Help From Above?

In Washington, many intelligence officials want to push the running of homeland security as far away from the nation's capital as possible. In November 2006, President Bush approved a set of guidelines to govern how federal agencies share terrorism information with states, localities, tribal governments, and the private sector, which owns and operates 80 percent of the nation's infrastructure.

The guidelines were submitted to the White House by the Office of the Director of National Intelligence, but they were developed by state and local officials, including many of those running fusion centers like JRIC.

The guidelines call for a "federalist, or shared-responsibility, approach to information-sharing." The federal government will "promote ... a network of fusion centers" but won't control it. The FBI's Joint Terrorism Task Force and the Homeland Security Department, which is legally the point of contact for states and localities, are cast as partners, not directors.

"Fusion centers cannot carry out their efforts in a vacuum. They rely on intelligence and other information from federal entities so that they can develop intelligence priorities," says John Cohen, a spokesman for Thomas McNamara, the former U.S. ambassador-at-large for counter-terrorism and the man who heads the information-sharing environment office that submitted the guidelines to the president.

"They also need to be able to view local events within the context of national, even global, terrorist patterns," Cohen says. "State and local officials need this federal information so that they can protect their local communities, and they are telling us that they still are not getting the information they need from the federal government. We are listening and are working aggressively with these states and localities, as well as the intelligence community, Homeland Security, the Defense Department, and the FBI to fix it."

Today, some threat reporting comes from the Homeland Security Department and some from the FBI. Those entities have sparred over which should be the primary conduit for states and localities, and who should decide how much they get to know.

State and local officials, meanwhile, complain that threat reporting is inconsistent and that much of what they know comes from their own residents. Even in Los Angeles, where relations have remained congenial, Chief Bratton says that the federal agencies need to settle their disputes and to give the locals more information.

"How do we get the feds to make nice with each other -- that's still the big issue," Bratton says. From his perspective, local officials have already made a sizable investment in homeland-security policy. "I easily spend 40 percent of my time on terrorism matters," Bratton says, including talking to journalists and members of Congress. Of the federal agencies whose intelligence Bratton wants, he says, "Locals have to be accepted into what was a private club.... We're the new kids knocking on the door."

"We're Gonna Get Hit"

Ask Stephen Tidwell where the FBI and his friends in L.A. are looking for the next terrorist threat, and you'll get no specifics. "We're looking everywhere.... We spend hours upon hours," he says. "Got people not sleeping very much. People walking around like zombies.... We can't have enough eyes looking."

Considering his obsession with standing vigil over L.A., it's odd that Tidwell's office on the 11th floor of the Federal Building looks not to the south and east, over the city's concrete expanse, but to the northwest, taking in the verdant Santa Monica Mountains, which run east to west, to the Pacific Ocean. It's a vivid reminder that Los Angeles sits in a bowl, surrounded by natural forces that also conspire to wipe the city off the map.

Immediately outside Tidwell's panoramic window, the Los Angeles National Cemetery spreads in a gradual upward slope toward the mountain range. Dedicated in 1889, the 114-acre garden of stone holds the remains of more than 84,000 veterans of four American wars, from the Spanish-American to the Korean.

"We game out in our heads multiple suicide bombers or multiple IED attacks," Tidwell says, referring to Iraqi insurgents' weapon of choice, the improvised explosive device. He pauses and glances out the window. What really scares him, Tidwell says, is what happens after the attack. "Eighteen million people, trying to self-evacuate out of here, will collapse this place."

"We're gonna get hit here," Tidwell says. "When it does happen, how are we going to hunt them? How are we going to find them?" By his calculus, every set of eyes, every listening post, every JRIC is one more barrier that terrorists have to overcome. The best chance to save L.A. is to make their job harder. "We're building fences," Tidwell says. "We want enough fences between us and them."

Published in National Journal.

Three days after Sept. 11, Waters, along with more than 150,000 others, applied to work for the CIA. The CIA typically receives tens of thousands of applications, and accepts fewer than 1 percent. To handle the deluge of job-seekers, hiring officials brought in retired officers and seconded other staff. Nearly a year later, after a battery of interviews, medical exams and psychiatric tests, the agency offered Waters a job, and he joined the first post-Sept. 11 class of the National Clandestine Service - the country's top spies.

Waters, who wrote a book about his experience, called Class 11: Inside the CIA's First Post-9/11 Spy Class (Dutton, 2006), says he and his fellow spies-in-training were singularly motivated: "Everyone was there to make sure another attack didn't happen." The character of this class was unusual. "There was a strong business flavor. Investment bankers, corporate attorneys." Not the expected bunch of recent college graduates with no work experience and few marketable skills.

Waters had chosen a particularly inopportune time to join. Since applying, he and his girlfriend had married and were trying to have children. Waters writes that he "disappeared" for the first year of his marriage, "even when we [did] manage to live under the same roof."

Class 11 chronicles Waters' year of demanding training. The narrative is steeped in his sense of awe, intrigue and unbridled excitement about the lifelong adventure ahead of him. There is no doubt that he wanted to spy for his country. But by late 2004, he and Cathy were expecting their first child and planning for another. The path to parenthood had been difficult and expensive - they blew through much of their savings on fertility treatments. Cathy wanted to stay home with the baby. Waters knew promotions and pay raises in the CIA were based on time served; there was no accounting for his years of professional expertise, which would fetch higher wages in the private sector. Waters questioned whether he could support his family on an entry-level salary and pay for a home in the Washington area, all while pushing 40.

"I sat down and did the numbers and scared the hell out of myself," he says. "I would be 65 by the time my children got out of college. The first phrase that came to mind was, 'Welcome to Wal-Mart.' "

So in February 2005, Waters quit. "That last day, walking out, that was hard," he says. If the money had been right, "I would have never left." Today, Waters is a contractor for the Defense Department, working in counterintelligence at a security facility in the Army's Special Operations Command, back in Tampa. He also has done contract work for the CIA. In many ways, he hasn't left the intelligence community, but now his shopping options extend beyond the discount chain.

Mind the Gap

Tom Waters could be the poster boy for a new breed of intelligence agency employee. They are the future spies, analysts, technologists and linguists who signed up in the grips of a nationalistic furor over terrorism. They believe America has enemies, and they want to fight them. They hail from the best schools and come equipped with skills intelligence agencies desperately need.

Many of them also have no intention of spending a career in government. Pledging allegiance to a single agency and a 30-year career track is a foreign concept. Monetary concerns figure heavily in their professional calculus. Mobility isn't a ladder, but a hopscotch board. They might have multiple careers, maybe retire early, go to cooking school. Old hands have a name for these 21st century rookies, not all of whom are young. They call them, derisively, the "millennials."

The intelligence community is divided by a generation gap, one that threatens to undermine its ability to perform its missions, including keeping the country safe from terrorists. The intelligence workforce is out of balance. It can be plotted as two humps on a graph. At the beginning of the experience spectrum are the millennials, green, just learning the ropes, no more than a half-decade of experience under their belts. They make up more than 35 percent of the total intelligence workforce. At the far end is a large number of highly skilled, longtime employees, moving closer to retirement by the day. In between those two humps, where there should be a stockpile of experienced middle managers, the future leaders of the community, there is instead a deep, unsettling valley.

The agencies' top leaders are laboring furiously to fill it. In the nearly six years since Sept. 11, the CIA and other agencies haven't wanted for applicants; there are more people who want jobs than there are billets. But training employees takes years. To fill the gap in the meantime, during wartime, the agencies have hired contractors in record numbers. The agencies have outsourced some of the most sensitive functions, including analysis, spying on foreign adversaries, prisoner interrogation and translation services.

The outsourcing could be temporary, assuming intelligence agencies eventually replenish their personnel stocks. Except that the agencies actually are competing with the contractors for workers. According to the five-year strategic human capital plan at the Office of the Director of National Intelligence, "those same contractors recruit our employees, already cleared and trained at government expense, and then 'lease' them back to us at considerably greater expense."

Today's competitive job market is defined not by the institution, but by the free agent. The federal intelligence community has become a place where the millennials learn spying tradecraft, obtain a coveted top-level security clearance and then bolt to contractors for heftier paychecks. This has become so common that intelligence observers now fear it could become the career path of choice - break into the private sector via the government.

Assessing the situation, Ronald Sanders, the intelligence community's top personnel manager, says the notorious phrase "human capital crisis" is not a bad choice to describe the predicament. "Certainly potential crisis is an apt description," says Sanders, chief human capital officer at ODNI.

The Wages of Peace

No one in the intelligence agencies is surprised it has come to this. The crisis was entirely predictable, they say, and can be traced, ironically, to a peace dividend. Following the collapse of the Soviet empire, Congress and the administration decreased intelligence funding and pruned back the workforce. The decision was not without controversy, but the prevailing wisdom held that with the country's main enemy out of the way, there was no need to maintain a wartime footing. Former CIA director George Tenet has said that in the 1990s, agencies eliminated or didn't fill 23,000 positions. "The intelligence community was literally gutted," Sanders says. "By design or by default, we were downsized dramatically. We lost core capability."

What was left of the Cold War workforce moved into the senior ranks and management positions. "Now, you turn around and look behind them, there's nobody there," Sanders says. That's the valley between the two humps.

Fast forward to Sept. 11, when the anemic agencies were thrust to the front lines of a new war on terrorism. The workforce had to scramble against a new enemy, one that few understood. The hiring push, and the contractor spree, ensued. Sanders says staffing levels are "finally getting back to where they were" before the 1990s cuts. But most of the new recruits are filling entry-level jobs. "Our bench strength at the midcareer level is really problematic," he says.

The millennials still aren't fully trained, and aren't ready to head into the valley. It takes, on average, three to five years to season an analyst, and about seven years of work "on the street" to sufficiently train for clandestine work, says Mark Lowenthal, who retired in 2005 as assistant director of central intelligence for analysis and production. He worked in the intelligence agencies for more than 30 years, and spent a good part of his career wrestling with the personnel crisis.

Historically, Lowenthal says, the agencies have trained independently. "If you join [the National Security Agency], you go to the NSA school. We put you in a stovepipe as soon as we get you." On the rare occasion employees want to transfer, managers see them as essentially untrained. "They treat you like they've never seen you before inside the system. You're an outsider," Lowenthal says.

Over time, employees developed narrower, agency-specific expertise about emerging threats. There was no spirit of collaboration, because the workforce wasn't designed for it. This is the institutional reason so many dots about terrorism remained unconnected before Sept. 11.

Now, policymakers are demanding that agencies share their knowledge and expand their targets beyond the old Soviet foe. "The subjects that we worry about have all changed dramatically," Sanders says. The experience gap impedes the agencies' evolution. Personnel managers know they can't fill it by speeding up training times. So they've decided to get smarter about using the expertise they have. To keep the human capital crisis from sinking the intelligence community, they say, the community needs to act like one.

Taking Stock

Before he retired, Lowenthal helped launch a communitywide catalog of intelligence analysts, a kind of Yellow Pages that lets managers see who has expertise on specific regions or issues. Such detail is essential for long-term human capital planning, managers say, and reflects a core belief - which is not universally shared - that an analyst is an analyst, regardless of which agency he calls home.

Managers have made some startling revelations in the catalog. For instance, "We are woefully deficient in the number of analysts who have expertise in sub-Saharan Africa," a region of great concern to policymakers, Sanders says. Previously, managers understood such shortfalls only "at the anecdotal level," he says, and couldn't efficiently plot to fill the gaps. In the coming months, managers plan to launch catalogs for intelligence collectors, technologists and acquisition specialists.

Knowing how employees spend their time also lets managers eliminate redundancies, which they can ill afford. Recently, ODNI asked agencies, "Who does what on Iraq?" "[It] took a couple of iterations before people understood the question," Thomas Fingar, the deputy director of national intelligence who oversees analysis policy, said in a speech in Denver in August. Some people replied, "We do everything on Iraq," and others said they did "important things on Iraq" and disseminated their work to "important customers" in all kinds of ways.

"We discovered a very large community of people acting like 8-year-olds playing soccer, bunched around a ball over here and a lot of areas of the field uncovered," Fingar said. But apparently, just knowing where the overlaps existed helped to get rid of them. "As soon as components of the analytic enterprise [the various agencies working on Iraq] saw that, they didn't need me to tell them to adjust; they began to adjust," Fingar said.

Managers are trying to fill other skills gaps quickly. To beef up the low numbers of linguists who can speak Arabic, Dari, Chinese and Korean - to name a few - agencies last year gave several hundred scholarships to college students. They agreed to study languages in exchange for a work commitment. ODNI also is paying for summer language immersion programs for elementary and high school students. "You've got to get to them as young as possible," says Lowenthal, who was in charge of language programs for analysts.

Officials want to close a gap in the security clearance process, as well. New Director of National Intelligence Michael McConnell wants to speed up that process, which can take more than a year, and to make it less rigorous for first- and second-generation Americans, the native language speakers who hail from immigrant neighborhoods. The clearance process generally nixes people with relatives and business ties overseas, fearing that recruits could be blackmailed or compromised.

All these near- and longer-term fixes might help keep the intelligence ship afloat. But there's also a softer side of management for which there's no easy solution - keeping employees happy.

In Search of Leaders

Every year, Fortune magazine publishes the authoritative ruling on where companies rank in terms of employee satisfaction, the "100 Best Companies to Work For" list. It's compiled through surveys that ask employees to respond to such statements as "I've got all the tools I need to do my job" or "There's a minimum of back-stabbing and politicking."

Fortune's Milton Moskowitz, who co-wrote the 2007 survey, says that regardless of a company's size or earnings, two key trends help dictate how great a workplace actually is: "a strong mission and a strong culture that people buy into," he says, and "communication between management and employees. Not just from the top down, but are there opportunities for employees of these companies to talk back."

The Fortune survey doesn't examine government agencies. But Moskowitz says the essential themes are constant. So, where would the intelligence agencies rank? According to the most recent Intelligence Community Employee Climate Survey, released in April, 74 percent of participants gave a "positive" response when asked, "Considering everything, how satisfied are you with your job?" Only 12 percent responded "negative." The positive rating exceeds that of the 2006 Federal Human Capital Survey, which gauges the governmentwide mood.

But intelligence employees aren't as positive about their managers. Only 57 percent of survey respondents said they "have a high level of respect for my organization's senior leaders." Twenty-four percent were neutral, and 17 percent had a negative response. Asked to rate their leaders' ability "generate high levels of motivation and commitment in the workforce" the numbers fell: 43 percent positive and 25 percent negative. The five-year human capital planning document concluded that "many employees across the [intelligence community] are looking for even stronger leadership, and leaders who will help them fulfill their potential."

Such people are called mentors. The millennials crave them. And that leaves some old hands scratching their heads.

The intelligence agencies have some official mentoring programs, but longtime employees say these don't amount to a widespread, institutional focus on rearing a new generation. Mentoring "is one thing we do badly," Lowenthal confesses. New recruits, particularly younger ones, "have this expectation that they will have a mentor. I don't know where they get it."

Intelligence veterans are flustered by their needier colleagues. Intelligence is a silent service, they say. Most victories never are celebrated publicly, and the culture "does not cater to individual attention," says a former CIA official.

This official recalls an anecdote that exposes the dark underbelly of the generation gap. A senior officer, who managed a pair of new analysts, arrived in the office one day to find that "one of the kids hadn't shown up for work," the former official says. Hours later, the young analyst appeared, and the boss asked, "Where have you been?" The analyst explained that "one of his friends had had a 'professional crisis. We had to sit down and work things out.' " The former official says his colleague was speechless, and later said in private, "You know, I had a bad day once. No one cared!"

Senior employees who think these usually younger millennials are soft blame the parents, suspecting they were too quick to reward the child's every achievement, no matter how insignificant. The old-timers call them "trophy kids," a nod to Ben Stiller's character in the film Meet the Fockers, whose parents built a shrine for their son's 9th place ribbons for various childhood sporting events. Stiller's future father-in-law, played by Robert DeNiro, is repulsed by this celebration of mediocrity. Fittingly, DeNiro's character is a retired CIA operative.

"This is not a system where everybody sits around the table with their Play-Doh and shares and applauds for each other," the former official says. "It values devotion to the system and overwork, and an absolute feeling of being part and parcel of that system." But that, the former official admits, "creates turnover." Whether that's an acceptable outcome depends on who's asking the question.

Sanders says in core skills - analysis and collection - "our retention is very high." His office has measured top-performing employees against the overall government figures. "The attrition rate for the people with the highest performance ratings is markedly lower than it is for overall attrition," Sanders says. "So, we are keeping the very best people."

But some former spies say otherwise. Lindsay Moran, who worked in the clandestine service at the CIA from 1998 until 2003, has written that the agency's official attrition rate - about 4.5 percent - is, "like almost everything else about the agency . . . deceptive." Spies, she argues, are leaving at a higher rate.

"When I was a clandestine service trainee, we used to joke about people who were on the 'five-year plan,' " Moran wrote in Government Executive in 2005. Recruits would join, undergo training and then quit after a short overseas tour. "Sometimes these officers left for personal reasons, but more often they came to the disheartening realization that the operations directorate [where the spies work] was poorly managed to the point of near dysfunction," she wrote. Contradicting Sanders, Moran wrote that the CIA suffers from "reverse Darwinism: The best left early, while mediocre officers stayed and inevitably were promoted."

Lowenthal bemoans attrition as an unfortunate byproduct of the intelligence system. Before he retired, the community was attracting bright crops of analysts. "They were not all refugees from failed dot-coms," he says. "They were joining because they felt we had been attacked, and they wanted to serve our country. What else could you ask for?"

The rookies come from companies where mentoring isn't a foreign concept, and from a workplace culture that encourages versatility. Once they get inside the intelligence system, with its demand for an outdated kind of devotion, the excitement that drove them to service dissipates. "We do things to them in terms of career management that beats that out of them," Lowenthal says.

But the millennials and the trophy kids have a thing or two to teach their bosses about management.

Generation Next

"Intelligence reform" is an umbrella term that encompasses the changes in workforce culture that agency managers want to make. They want to enhance employees' use of technology, to allow a new generation of analysts and collectors to collaborate, to share information so they can connect the dots. To a lot of managers, these are buzzwords, but they have real meaning. And no one understands that better than the millennials.

"If you think about what skills those kids bring in, they have grown up with cell phones, e-mails," says Tom Waters, the former spy. "They do not know how to stovepipe information. It's completely foreign to them. Their encyclopedia is not Britannica, it's Wikipedia."

These new workers approach their jobs in a fundamentally different way, Waters says, one that's an anathema to many old-timers, but completely in line with where legions of experts and critics say the community needs to go. "They'll hear something, and they're going to immediately bounce it off their buddies, who are cleared." Problem-solving sessions could look a lot like two young analysts sitting down together and "working it all out." Intelligence could evolve into a far more open, and informal, craft.

Managers are starting to catch on. In the past year, the intelligence community has launched its own version of Wikipedia, called Intellipedia, which lets more than 3,600 users share information - and challenge it - in a classified setting. Analysts write posts and add to entries about the most difficult targets the agencies face. This year, employees will begin using other online collaboration tools, including one that gives credit by name to anyone who provides "insight that fills an intelligence gap," according to a DNI planning document.

Intelligence managers also want to sate younger workers' appetite for mobility. In the future, all promotions to senior positions will require joint-duty assignments. Employees must serve at more than one agency and try their hands at different skills. Sanders says he has spoken to hundreds of rookies full of wanderlust. "I can scratch that itch," he tells them.

Sanders and his colleagues are in a rush against retirement to institutionalize their reforms. "I don't think we have time for this to take 10 years," he says. "We're about two years into something that I hope we can get done in four, and at least say, we've reached the tipping point."

However agencies get there - probably through a generational shift - managers are banking on the fact that, for a select and sufficient few, the allure of the intelligence business always will be unique, and will bring the most dedicated to their door.

In Class 11, Waters writes about his first day at CIA headquarters, when he and his colleagues huddled around the famous agency seal, carved in granite on the lobby floor. "We grin like maniacs. . . . This is where presidents and dignitaries take pictures commemorating their visits. To stand here is to truly appreciate the exclusivity of our new jobs."

Today, Waters still has some entree into that exclusive club. His contractor work brings him, on occasion, back to headquarters. And though that trip is tinged with nostalgia, he says some things remain the same. "I've got that same, stupid grin on my face when I drive in again." he says.