Defense Secretary Donald H. Rumsfeld (search) said Friday he was surprised by the effectiveness of Saddam Hussein's loyalists to sustain the Iraq conflict long after the end of major combat operations. He called the continuing fighting serious but described it as low intensity.

Fear instilled in the Iraqi people by the ousted leader's former paramilitary force is contributing to the situation, he told an audience of more than 500 at the Ronald Reagan Presidential Library (search).

"I suppose on reflection the thing that probably surprised me the most is the ability that the so-called Fedayeen Saddam (search) people had to terrorize and frighten the rest of the Iraqi people and cause them to not come over to the other side," Rumsfeld said in answer to a question from the audience.

Two U.S. soldiers were killed in an ambush in Iraq on Friday, bringing to 94 the number of American soldiers killed by hostile fire in Iraq since President Bush declared an end to major combat on May 1.

Rumsfeld said coalition forces made 1,700 patrols daily in Iraq and only a tenth of 1 percent involved any kind of armed conflict. "It is a very low-intensity situation, percentage-wise, nonetheless people are getting killed," Rumsfeld said.

His comments followed a 20-minute talk on the legacy of Reagan. Among those attending the event were former first lady Nancy Reagan (search) and former California Gov. Pete Wilson (search).

In his speech, Rumsfeld did not mention a recent White House move to set up, under national security adviser Condoleezza Rice (search), a new National Security Council oversight group for Iraq. Earlier in the week, he reacted angrily to suggestions he was being sidelined, saying oversight of Iraq would gradually drift from the Pentagon to the State Department.

Afterward, Rumsfeld dismissed the issue.

"The National Security Council is doing what its charter suggests it should do, and that is to say, coordinate among the various agencies and departments. And I think it's been blown considerably out of proportion," Rumsfeld said in an interview with Fox News.

In an interview with KNBC-TV Los Angeles, Rumsfeld was asked about rumors he would not be part of the Cabinet if Bush is re-elected.

"Oh my goodness, chitchat. Who knows? We all serve at the pleasure of the president," Rumsfeld said, adding that he has no plans to step down.

During his speech, Rumsfeld said the coalition's achievements in Iraq are impressive, listing the opening of schools, hospitals and a new central bank.

"These are things that took, you know, a year, two years, five years, 14 years in Germany after World War II and over in Japan after World War II, and they're being done in a matter of months," he said.