This is a rush transcript from "On the Record," November 2, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Now you are going to Islamabad, where Secretary of State Hillary Clinton took a three-day trip, and her tone was tough and blunt. Now, the secretary was critical of Pakistan for not doing enough to fight al Qaeda, and her criticism doesn't stop there. One thing we noticed in Pakistan, Secretary Clinton's trip got enormous attention. We met the secretary in Islamabad and we asked her about all the attention she was getting.

(BEGIN VIDEOTAPE)

HILLARY CLINTON, SECRETARY OF STATE: Well, I've had a great trip. This is the third day of a three-day trip, and I've really gotten out to talk to people and listen to them and try to explain, you know, some of what we're trying to do so that we dispel some of the misconceptions.

VAN SUSTEREN: Well, you were tough on them, though. I mean, I have one quote where you said, "I find it hard to believe that nobody in your government knows where al Qaeda is and couldn't get them, if they really wanted to." So you're talking about that -- you're hard on the government. You weren't -- you weren't -- you weren't sugar-coating anything.

CLINTON: Well, Greta, what we're trying to do here is to rebuild a better relationship. You know, we've been friends and allies of Pakistan going back to their beginning, but there is a deep level of mistrust and suspicion about America's intentions and actions that has built up over the last eight years. When we came into office, we looked at the -- you know, the public research and we saw that even though we have a common enemy and a common threat that we have to pursue together, there wasn't the base of understanding that there needed to be.

So I wanted to come and I needed to, you know, find time so that I wouldn't just talk to government officials, as important as that is, but get out into, you know, different settings, universities and business groups, and really listen to people.

And they said to me very clearly, Look, we have a trust deficit for you. And I said, Well, look, that's a two-way street. And I'm happy to take any of your questions. I'm happy to admit where we may not have always done as well as we could have in our relationship. But a lot of people back home want to know, you know, How come al Qaeda has a safe haven in Pakistan? How come we arrest somebody like Zazi and find out that he was trained in a training camp run by al Qaeda in Pakistan?

I think that's the kind of relationship we need to have. I mean, we're very impressed by the campaign that the military here is running against the Pakistan Taliban in Swat and South Waziristan. But our point to our friends in Pakistan is that that is an important and necessary step for you to take, but remember that there is a terrorist syndicate with al Qaeda at the head. They inspire. They direct. They fund these groups. And so you can't just say your job is done because you've cleared out Swat and you've cleared out South Waziristan until we truly root out what is, in my view, the source of a syndicate and a lot of the problems that Pakistan, Afghanistan and the rest of us face.

VAN SUSTEREN: Well, I realize sort of you've got to have a -- you certainly have a different role here in this country than I do, but what struck me is that there was -- there is some blame among the very few people I spoke to that we're responsible, for instance, for the violence that they just recently had because we're not handling our affairs in Afghanistan, it's pushed down into Pakistan, and that it's somehow, you know, in part our responsibility. Is it in part our responsibility, or is this just them blaming us?

CLINTON: Well, that's where we need to have the kind of dialogue I'm talking about. Clearly, al Qaeda left Afghanistan and we let them out. You know, we should have taken them out when we had the chance back in '01 and '02. And they escaped, and they escaped into Pakistan. So to that extent, you know, if we had done a better job going into a Afghanistan and captured the people who attacked us or killed them, you know, we would be maybe in a different position.

But there are homegrown terrorists here in Pakistan. They've made common cause with al Qaeda. So we can look backwards through the rearview mirror and say we shoulda, coulda, woulda, and you shoulda, coulda, woulda, too. Or we can say, Look, we have a common enemy. And we're proud that you're going to after the Pakistan Taliban, who are causing so much damage and destruction, that terrible bombing in Peshawar the other day. But that's not enough. You have to help us get al Qaeda. You will be more secure if you help us get the people who are helping to fund and train and equip the very people you're going after in South Waziristan right now.

(END VIDEOTAPE)

VAN SUSTEREN: Up next, the nightmare, nuclear weapons in the hands of terrorists. Secretary Clinton answers that terrifying question. Is Pakistan's nuclear arsenal secure?

(COMMERCIAL BREAK)

VAN SUSTEREN: More with Secretary Clinton.

(BEGIN VIDEOTAPE)

VAN SUSTEREN: Well, it seems another one of the controversies here is the aid from the United States. I mean, we have an enormous goal to help them, for self -- forget the humanitarian reasons, and that's also important to keep -- you know, so they have a stable economy and a stable government. But of course, we have self-interest because of the homegrown terrorism that gets sent over to the United States. But they don't like it when we give them aid, and we tell them we have strings attached to it, This is what we need to have you do with it. That's a problem.

CLINTON: Well, we had a lot of discussion about that because this really became a very big issue here in Pakistan, and I don't think most of us in America really understood what's the beef. You know, we're trying to demonstrate a long-term commitment to the development of Pakistan, to your energy sector, to education, infrastructure, health, the kinds of things that will provide a greater level of stability for the people of Pakistan because their incomes will be rising and their futures will look better.

But in the, you know, three days I've been here, we could have phrased some things differently. We could have been a little more sensitive to how we are perceived. I've been very clear. I've said, Look, if you guys don't want the aid, you don't have to take it. I mean, we think it's in your interests and our interests that we have this relationship. But they've come back and said, No, wait a minute. We -- you know, we didn't understand some of what you were talking about there.

So you know, there's enough room for misunderstanding. We need to clear the air and we need to do it on an ongoing basis.

VAN SUSTEREN: There has been some suspicion on the part of India that aid from the United States to Pakistan was being used to form these terrorist groups that then would inflict terror in India. I mean, they're even suspicious of the sort of the cycle of where the aid goes. Do the Pakistanis not understand why we Americans would really want to know where the money is spent and how it's spent and why we put the strings on it?

CLINTON: I think that they do understand that, but I think that what their concern was, is that some of the way we worded what is the accountability, that we have to be accountable to the American taxpayer -- and I've said that over and over again in my meetings -- they didn't -- you know, that it was taken the wrong way.

VAN SUSTEREN: Yes, like, what, because now I sort of have the misunderstanding of their misunderstanding because...

(LAUGHTER)

VAN SUSTEREN: ... I'm coming here and thinking, you know, We're giving you money, and you're complaining about, you know, the strings. So what don't I get?

CLINTON: Well, I'll give you an example.

VAN SUSTEREN: OK.

CLINTON: You know, one of the features in the bill was to say the United States has to, you know, verify that there's civilian control over the military. Well, I can see why the government and the people would say, We just got rid of a military government because we wanted a democracy, and the democracy is now in place and we are in charge. And why would you question that? I mean, do you see what I mean? So we just have to be aware.

The point is that what that bill was intended to do was to demonstrate a long-term commitment to Pakistan, which I think is absolutely right. What it did not do was impose micromanaging and all the rest of it. But what is absolutely clear is that when we give aid anywhere, we have accountability measures. And I've explained that. This is not unique to Pakistan. This is something that, you know, we expect.

And so I think we could have been just cleaner and simpler and say, you know, We need to make sure that whatever aid we give goes for the intended objective, and there will be measurements of accountability to ensure that that happens. You know, I think that's exactly the kind of, you know, straightforward expectation that they should have about what it is we're doing.

VAN SUSTEREN: Are you confident that the nuclear weapons here in this country are secure? Because I know -- at least, I've read that if we don't help them out financially, the government's going to crumble. So I assume that we need to financially help them so their government doesn't crumble so their weapons continue to remain safe. Right or wrong?

CLINTON: Well, I do have confidence in the security of their nuclear arsenal. And I'm sure that this democratic government, you know, is, you know, under that kind of threat. But we want to strengthen democratic institutions in Pakistan. We want to, you know, create the conditions where the people of Pakistan have a stake in the future that they're trying to build together. We want to, you know, eliminate any kind of, you know, a safe, you know, haven or any kind of support for these terrorist groups because it's in our interests, but it's also in the Pakistani interests. So that's, you know, what we're challenged by and that's what, you know, I get up every day and try to work on.

VAN SUSTEREN: And even our strategy in -- military strategy in Afghanistan bleeds over into this country. I mean, you can't just sort of, I guess, look at it in a vacuum. When the president makes that decision, it's going to bleed into this country, whatever the decision is.

CLINTON: Absolutely. I mean, when we first did our review upon taking office, we concluded that you had to look at Afghanistan and Pakistan together in light of the war on terror that we had to wage. And we are well aware that, you know, the stronger the partnership we have with Pakistan, the stronger their efforts to root out terrorists in their own country, the better the situation is across the border in Afghanistan.

VAN SUSTEREN: So why do you like this job?

(LAUGHTER)

VAN SUSTEREN: I mean, this is -- I mean, I'm not kidding. I say, Why do you like this job? I mean, it -- it is so complicated!

CLINTON: It is. It's really complicated and it's very hard because, first of all, I believe that the United States has an essential role to play in the world and there's not a problem we can walk away from, that we have to prioritize because we can't be all things to all people, but we have to be out there trying and working to solve problems and convincing people to come to our side and understand how we see the world. And I believe it's absolutely critically important -- probably more complicated today than it's been in the past, but even more important today.

(END VIDEOTAPE)

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