This is a rush transcript from "On the Record," July 15, 2010. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: We've been waiting to bring you this interview, Homeland Security Secretary Janet Napolitano going "On the Record." We went with the secretary to Laredo, Texas, on the U.S./Mexico border for the inside story on the border crisis. Secretary Napolitano, uncut and "On the Record."

(BEGIN VIDEOTAPE)

VAN SUSTEREN: Madam Secretary, nice to see you.

JANET NAPOLITANO, SECRETARY OF HOMELAND SECURITY: Nice to see you.

VAN SUSTEREN: And right on the border, I see that cars are coming in from Mexico into our country?

NAPOLITANO: Right. This is one of our busier ports, and a lot of truck traffic, not right here but elsewhere, and vehicles, as well.

VAN SUSTEREN: All right. Why are you here?

NAPOLITANO: I'm here for a number of reasons. One is we are announcing what are called Stonegarden grants. These are grants for local law enforcement who help us with our border security efforts. But they need help with overtime, with equipment, personnel, all those sorts of things. So we were able to announce Stonegarden grants. And of course, we had increases all along the border.

Secondly, to meet with law enforcement here. Washington, D.C., is one place, but I need to stay in touch with what people are seeing and dealing with on a daily basis right here in the border area. So we had a great meeting there.

And then third, I'm going to come -- after we're done with this interview, I want to come through the port, talk to some of our people, see what the physical facilities are looking like, with the increase in port traffic, and just get a sense of what they're dealing with.

VAN SUSTEREN: All right. The -- the sort of the big elephant in the room is Arizona. Why didn't you go to Arizona and make the announcement there about these grants?

NAPOLITANO: Oh, well, I could have because Arizona obviously got a big increase in their Stonegarden grants. But there are ports all along the border, and so Laredo was on my schedule, and that's where I came to do it.

VAN SUSTEREN: So you're not running from Arizona? They want you to visit, you know!

(LAUGHTER)

NAPOLITANO: No, I'm not running from Arizona, and I've been in Arizona several times as secretary. Today, I'm in Texas and talking with Texas law enforcement.

VAN SUSTEREN: All right. Does Arizona, which has been the subject of so much discussion about -- since SB1070 -- does Arizona, the Tucson sector, have an illegal immigration -- are there illegal immigration problems along that sector?

NAPOLITANO: Yes.

VAN SUSTEREN: (INAUDIBLE) insecure.

MORRIS: Well, there's illegal immigration, obviously, in that Tucson sector. And we are putting lots of resources into that sector, as we have -- we've been adding resources in that sector for 18 months. We've added more border patrol personnel. We've added more customs personnel, more K-9 teams, more equipment of all sorts right in that Tucson sector. But we still want to do more. And so we will see a surge in resources going in that Tucson sector over the next months.

VAN SUSTEREN: Could you secure that border? Is it possible to secure it?

NAPOLITANO: Well, it's -- it is -- you know, look, there's secure and there's sealed. And sometimes I think in Washington, D.C., people use the terms interchangeably. But you cannot seal a border. You can't seal the Tucson sector. You can't seal this sector.

Tucson sector particularly difficult because part of it is mountainous, part of it is tribal lands that we have no absolute rights on. Part of it is right next to -- you have two major urban areas right next to each other, separated only by a strip about as wide as the distance between the two of us. So it is a sector that has every kind of difficulty one experiences in managing a border. But that's why we keep adding manpower, technology and infrastructure. And the numbers keep going down in terms of illegal crossing and the numbers keep going up in the case of drug cash and gun seizures.

VAN SUSTEREN: So why is everybody so mad at Arizona? Why -- you know, because I tell you, I mean, you hear those numbers -- and I've reviewed them. The crime statistics are going down. But the people of Arizona, they -- they're -- a great portion of them are very upset with the situation there. They think the federal government has completely abandoned them in terms of doing it. You see the stories across the border in Mexico that are horrifying, and of course, the fear that, you know, tomorrow could be Arizona's turn. So what is your theory on why Arizona is so upset?

NAPOLITANO: Well, I'm an Arizonan. Of course I was the U.S. attorney there. I was the attorney general there, and of course two-term governor. So I've been working on that border a long, long time.

VAN SUSTEREN: In your state of the state addresses, 2005, 2006, you have said the federal government has let us down, failed us.

NAPOLITANO: Right. And I don't think the federal government is letting Arizona down now. Like I said, over the past 18 months we've put more resources into the Tucson sector as we have along the border from San Diego to Brownsville, Texas.

That Tucson sector in particular because historically that has been a major corridor for illegal immigration, drug trafficking, and for transnational crime. So we have been really supporting that sector very, very heavily.

You know, I can speculate on what is going on in Arizona. My number one thought is that the people in Arizona are frustrated at the lack of action on an immigration reform bill because I think the people in Arizona of all the states really recognize the importance of immigration reform to the overall agenda.

WATCH: Greta's Interview with Janet Napolitano - Part 1 | Part 2

VAN SUSTEREN: I in some way think that you got a tough job. You are the poster child for, having been governor of the state, now the director of homeland security. and you've got the United States Congress that hasn't passed any immigration reform to the satisfaction of the country. It hasn't even done to the dissatisfaction of the country.

And they are also the ones who authorize the resources for you to secure the border, and you've got two U.S. senators in Arizona saying we need more than you are giving. I see you are in a rotten spot, a tough spot.

NAPOLITANO: Well, I think this border need manpower. It needs all of those things with infrastructure. I think we are doing all the right things tactically along the border, and we are working closely with Mexico, because there's things that need to happen on the Mexican side. We have some unprecedented agreements with federal law enforcement in next Mexico.

All those things are happening. All those things are good things. The numbers are going in the right direction because of the law enforcement efforts that we have undertaken and state and locals have undertaken along this border.

But that doesn't substitute for the one thing which is missing, which is bipartisan agreement in Congress to move ahead with immigration reform.

VAN SUSTEREN: That's Congress, not the director of Homeland Security doesn't do that bipartisan -- that's not your job. Your job is to execute what they give you, not to change the law?

NAPOLITANO: As the secretary of Homeland Security we've certainly made clear in the Congress what they think the elements of such a bill should be and provided lots of information. But, yes, passing the law ultimately is the function of the Congress.

VAN SUSTEREN: Where is Laredo? I picked up the paper today, and just to emphasize this horrible problem right across the border, the headlines in the paper was rather stunning "Bodies piling up." That's the story about a drug cartel and some bodies being discovered.