• This is a rush transcript from "On the Record," July 19, 2010. This copy may not be in its final form and may be updated.

    DANA PERINO, FOX NEWS GUEST HOST: Now Secretary of State Hillary Clinton goes "On the Record" with Greta. Secretary Clinton is in the middle of a trip to Pakistan and Afghanistan, and Greta was fortunate enough to get to travel with her. She sat down with Secretary Clinton first in Pakistan, a country receiving a new aid package from the United States, part of $7.5 billion dollar commitment that our country has made to Pakistan over the next five years.


    GRETA VAN SUSTEREN, FOX NEWS HOST: Madam Secretary, nice to see you. And this is our second trip to Pakistan with you.

    HILLARY CLINTON, SECRETARY OF STATE: It is. Thank you for coming along.

    VAN SUSTEREN: All right, now, there's no secret we're having horrible economic problems at home. How do you convince the American people that spending money here in Pakistan is something we want to do?

    CLINTON: Well, I think there's three ways to make the case, Greta. Number one, this is where the principal terrorist threat to the United States emanates from. And we've seen some foiled attacks, thank goodness, in the last several months that have just demonstrated that.

    And we have to have a much closer cooperative relationship with Pakistan. We have to prevent Afghanistan from falling into a failed state that can then be a bigger danger to us. And that costs money.

    Secondly, if you really think about how much money it costs us as a society after 9/11, it was an incredible economic hit. And so terrorism on top of an economic challenge would be devastating for us, and therefore, we have to stay on our toes and try to prevent that from happening.

    And thirdly, I think that the long term benefit of having positive relationships in this part of the world is good for our economy as well. We have an export initiative that President Obama has announced. We want to double exports. We need to open up markets.

    How do you open markets? You raise standards of living. You eliminate insecurity so people can buy the things that the United States produces. So terrorism, economy, greater access to markets, all of that makes sense to me.

    VAN SUSTEREN: The security issue, it seems Americans really want security. We recently had the incident in Times Square which originated in this country. But are we getting ahead of the game? Is our money paying off in terms of getting security, because we've had this recent event, and we see violence all the time in this country?

    CLINTON: And the Pakistanis themselves are paying a big price because of it. They've had so many deaths due to bombings that these terrible terrorist networks impose upon the people of Pakistan. Their military has lost a lot of people in fighting.

    This is tough. I'm not going to sit and tell you that it is not. But boy, do I think it would be a mistake to walk away. We've done that. We've walked away from Pakistan and Afghanistan in the past with all the consequences we are well aware of.

    VAN SUSTEREN: So you think if we walked away from this and didn't give them the money today, it would be worse for us from a security standpoint?

    CLINTON: I do. We are building a relationship that did not exist. I said in our last trip that you were with me that we had a huge trust deficit, because the United States had to be fair, we had helped to create the problem we are now fighting.


    VIDEO: Watch Greta's interview with Secretary of State Clinton

    CLINTON: Because when the Soviet Union invaded Afghanistan we had this brilliant idea we were going to come to Pakistan and create a force of mujahedeen and equip them with stinger missiles and everything else to go after the Soviets inside Afghanistan.

    And we were successful. The Soviets left Afghanistan, and then we said great, good-bye, leaving these trained people, who were fanatical, in Afghanistan and Pakistan, leaving them well-armed, creating a mess, frankly, that at the time we didn't really recognize, we were just so happy to see the Soviet Union fall and we thought fine we are OK now everything is going to be so much better.

    Now you look back. The people we are fighting today, we were supporting in the fight the soviets.

    VAN SUSTEREN: Is there some sense of a win for us in the sense that we see all these casualties, we see casualties going up in Afghanistan. If we had Usama bin Laden, that would inspire the American people to feel much more committed to this project. Do you believe the Pakistan government knows where Usama bin Laden is?

    CLINTON: I think elements in the government do. I've said that before. But I think it is also important for your viewers to know we have been getting with Pakistani cooperation a lot of the top leadership of Al Qaeda.

    We haven't gotten bin Laden or Zawahiri, but we've consistently been able to track and kill a lot of their principal leadership. So there is a story to be told here. It's not yet what I want it to be, because as having been a senator from New York on 9/11, I want those guys. I will not be satisfied until we get them.

    But we've made a lot of progress. And we've created a closer cooperative relationship between the United States and Pakistan, in going after what are now common enemies.

    VAN SUSTEREN: Now we have the situation in Uganda. We have al- Shabaab, another terrorist group. It looks like terrorism is going global again in another area. Are we in any way going to get involved in that?

    CLINTON: We have supported what is called the African Union Mission which uses Ugandan troops and troops from Burundi. In fact the recent why Al-Shabaab went after the people in Kampala is because Uganda has been going after them inside Somalia, and we have been fully supportive of that.

    We are not in any way contemplating U.S. forces, but we want to support Africans fighting for Africa, and we will continue to support those who will take on Al-Shabaab, which is no longer a threat inside Somalia, but, as you point out, is spreading its tentacles beyond that.

    VAN SUSTEREN: You said some elements of the Pakistani government know where Usama bin Laden is?

    CLINTON: I believe that.

    VAN SUSTEREN: Why do you believe that?

    CLINTON: I think that's because if I put myself into a position of leadership in our own government, and if there were a terrorist network operating somewhere, even in the most remote place in the United States, some sheriff, some local state policeman, somebody in our collective government would probably know that there was something suspicious going on.

    So that's why I assume somebody, somebody in this government, from top to bottom, does know where bin Laden is. And I'd like to know too.

    VAN SUSTEREN: Can't we leverage our money or anything to get that information? He's 6'5, not easy to hide.

    CLINTON: We are leveraging it.

    VAN SUSTEREN: Are we getting closer?

    CLINTON: I don't want to put a proximity or timeline on it. As I've said, we have gotten closer because we have been able to kill a number of their trainers, their operational people, their financiers. We've been able to do that, so in that sense we've gotten closer. But I won't be satisfied until we get it done.

    VAN SUSTEREN: Does the Pakistani government say to you, Secretary Clinton, we are going to get him for you?

    CLINTON: Top levels of the government say they don't know, to be fair to them. It would similar, again, if somebody walked into my office and said do you know where bad guy in the Mexican cartel is on our side of the border? I would say I don't know, but I assume somebody knows. So I think we've got to keep pressure on, which we are doing.