This is a partial transcript from "On the Record," October 4, 2005, that has been edited for clarity.

GRETA VAN SUSTEREN, HOST: Mr. President, what surprised you most today?

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: How moved I was by the destruction even though I've been watching it on television ever since it happened. I just was amazed by the scope of it and I was also rather surprised by the anxiety, the level of uncertainty.

But I was terrifically impressed by the determination people had to rebuild the city. I thought, you know, there would be a lot of people maybe wanting to give up and there aren't many people who want to give up.

And, in the beginning, you know, it was so bad when a lot of those shelters, the ones in Houston I visited that I thought a lot of people wouldn't want to come back. I think if we can build a functioning economy back and make people whole, I think the city will thrive again.

VAN SUSTEREN: But how do we do that? The president said today that he wants to make sure in rebuilding the Gulf states and New Orleans (search) that the Congress and the rest of the country be fiscally responsible, putting on the brakes is the way I look at it in terms of money.

CLINTON: Oh, that hasn't stopped us for five years and this is all one-time expenditures what we have to do here — and I think we are morally obligated, just like we were when we had the 500-year flood in the Mississippi and the vast earthquake in California when I was president. It's bigger and it's worse but this is what we do.We help people become whole and I think we have to do it here.

VAN SUSTEREN: But where do we get this money? I mean we have a shortfall.

CLINTON: We do have a shortfall, but this is not the problem. I mean, the budget problems are caused by annual expenditures, the tax cuts (search), Iraq and Afghanistan (search) and homeland defense, the ongoing expenses, the new drug benefit with its subsidies to various interests. That's what causes a deficit.

A one-time increase in the deficit to help make a place that's been hurt whole is what we've always done. That won't have any lasting damage to the economy. It's the current expenditures, those repeating expenditures over and above our revenues that have gotten us in trouble with the deficit.

VAN SUSTEREN: How do we make sure that the money that we do spend actually arrives in the right location and is used effectively and that the right people get the contracts and there isn't waste and all those sorts of terrible things we all fear?

CLINTON: Well, I think there has to be transparency and accountability. I suppose in the immediate aftermath there was no way to avoid having some no bid contracts but they should be monitored very carefully. We've had bad experience with no bid contracts in Iraq and they should be monitored.

And, I think otherwise you have an open competitive bidding. You should have a very strong preference for local businesses and local employees. These people need jobs here. We will cut the taxpayer cost of helping them be made whole if we can put them back to work quicker.

So, helping to rebuild local businesses through making sure the contracts are heavily concentrated in these areas that have been devastated will be quite important. But I just think there has to be monitoring and accountability. We can make sure the money is not wasted if we're tracking it all the time.

VAN SUSTEREN: On Tuesday [New Orleans Mayor Nagin] said 3,000 city employees have to be laid off. It's very bleak here.

CLINTON: It is bleak. Well, there's no tax base and since the people aren't here a lot of those folks don't have work to do but it would be better if for a transitional period the payroll costs could be met of the local governments here and in Mississippi and Alabama and, you know, these African American colleges that educate so many people.

We're going to have to work through this. But I actually feel better about it than I did before I came. I think that they've got some good ideas. The Congress has appropriated a lot of money. It's just a question of whether the money will be spent in the right way, spent smart and spent to, you know, bring back the economy as quickly as possible.

That's the most important thing we can do is give these people — one of the most important things we do right now is get everybody else out of the shelters and get people in decent housing here or in other states and then we have to just go to work on the economy.

VAN SUSTEREN: You and President Bush 41 are leading the drive to raise money to help these people down in the Gulf states. What's the plan?

CLINTON: Well, first of all, we needed to come down here and see and listen and wanted to come together but he couldn't come until next week and he can only come on the day of my 30th anniversary and Hillary and I are going to try to celebrate our 30th anniversary together.

So, I came this week. He'll come next week. And then we'll put our heads together. We've been talking to people about helping us run this, making sure we have total transparency and total accountability because we feel obligated to the people who gave money to our fund.

But we have more money than we did last time for the tsunami, specifically dedicated to our fund, so we want to make sure that we consider all the different things, primarily not replicating government funding, helping the needs that fall between the cracks and making sure the money directly benefits the real folks who live here and I think we'll have some announcements in the weeks ahead. We don't to misspend this money. We want to do it right.

VAN SUSTEREN: When you and President Bush 41 worked together on this, was it a give and take back and forth, different ideas? I mean how do you two work together?

CLINTON: Well, it's different. In the tsunami it was quite easy because basically we were trying to raise the overall level of giving and we had a small fund and we only wanted a small fund that was within our control so that we can move money in a hurry and we used basically funded demonstration projects to show the kind of things people could do for South Asia and get a return.

Here it's somewhat more complicated. We raised, you know, a lot more money, somewhere in the neighborhood of $100 million and we need to have representatives who have time to, you know, review these proposals.

And then we've had people offer us legal and accounting and monitoring skills and, you know, consulting to help make sure they worked right, so this is a little more complicated but we've tried to work through that and who else we ought to involve and all that.

VAN SUSTEREN: Is it volunteer? I mean so that a lot of money isn't eaten up in sort of the bureaucracy of doing it?

CLINTON: Oh, no, no. No, we will have exceedingly low administrative costs because almost everything has been volunteer, you know. If we each appoint a representative, they'll be volunteers. We've had people volunteer legal and accounting services and other kinds of services to help, you know, take in the applications.

And then I have my foundation people and his are also doing a lot of this work, our staff are, so I expect we'll probably have the lowest administrative overhead of any fund in the whole Katrina pantheon. We'll be very careful about it. Almost all the money people give us will go direct to benefit people in this area.

VAN SUSTEREN: And it's really worse when you see it than when you see it on TV, isn't it?

CLINTON: Oh, it is worse. That's the thing that surprised me because you guys have done a great job of covering this. Everybody's done a great job of covering it. It's just not the same. You sit there and you look at these little houses and these cars buried in mud and you realize that a lot of these people they didn't have any flood insurance. They had that little house paid for. They had that little car. It was all their assets in the world.

And even more to me more painfully it's their memories, you know. We were in the lower 9th Ward and I drove by Fats Domino's house today and his name was still up on his house and I thought, you know, that's basically the only intact thing I saw there and I was a huge fan of his when I was a little boy.

And I just thought how many memories were just taken away. And then I became even more touched when I saw how determined these people were to come back but they're going to do it. This is a place that I've been coming to for literally over 55 years.

This is the first city I was ever in with a building over two stories high and it held my imagination my whole life and I just see it, I still see it underneath the caked remains of all those cars and houses underneath the heartbreak and the anger and the frustration and the desperation I just still see it gleam in the eyes of those people. They love this place and they want it to come back and I think it will if we help it.

VAN SUSTEREN: Thank you, sir. Thank you.

CLINTON: Thank you.

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