PHOENIX - Responding to criticisms of federal regulators by Congress, the top regulator of Fannie Mae and Freddie Mac invoked the Orange County debacle to argue for strong government oversight.

"One of the lessons I have learned . . . is that government regulators have a lot in common with the armed forces," said Aida Alvarez, director of the Office of Federal Housing Enterprise Oversight, which monitors the safety and soundness of the two government-backed agencies.

"Nobody likes paying for the military in peacetime, but when conflict erupts, critics complain about the lack of preparedness," Ms. Alvarez told an audience of thrift executives here.

"In the case of Orange County, I'd argue that a little prudent oversight of the county's investment policies - a little peacetime spending, if you will, could have gone a long way toward preventing this fiasco," Ms. Alvarez added.

She said that she hoped "that lesson isn't lost on those who want to toss out the regulatory checks and balances that legitimately protect us all."

She spoke at the annual meeting of secondary market executives organized by the thrift trade group, newly named America's Community Bankers. The group was formerly called the Savings and Community Bankers of America.

Speaking to reporters later, Ms. Alvarez said she was an "optimist" about how the Republican sweep of Congress would affect her office.

"We certainly want to be able to do our jobs in a climate where the emphasis is on less regulation," Ms. Alvarez said.

She said her office was "building a track record for being a new kind of regulator (with) a big-picture approach" that focuses on high-risk areas rather than micromanaging Fannie and Freddie.

She said her office hoped to get an exemption if the regulatory moratorium that Republican lawmakers have proposed comes to pass. The moratorium would freeze all regulations from Nov. 9, the day after Republicans swept the House and Senate, for six months.

Within the next two weeks, the oversight office will publish in the Federal Register an advance notice of proposed rulemaking for the capital stress test it is designing for Fannie and Freddie. The notice will solicit feedback on designing the test.

Ms. Alvarez told reporters that her agency is currently examining corporate governance at Fannie Mae and Freddie Mac. The process includes "poring over minutes" of board meetings, interviewing top management, and meeting board members. She said the aim was to determine role of each board in setting policy directions for management.

A year and a half after taking office, Ms. Alvarez said her relationship with the mortgage titans she oversees is "very positive."

"It doesn't mean that we agree on all the issues," she said. "But there is really fairly open communication. They feel comfortable about expressing a point of view. If I disagree, I tell them that I do and why.

"We've been in a position to have outcomes that achieve our ends, where they feel like we're not out to get them and we are listening," she said.

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