This is a rush transcript from "On the Record," May 24, 2010. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Tonight: You think Arizona is backing down? Well, think again! It looks like Arizona Senator Jon Kyl is locking arms with Arizona governor Jan Brewer, and they are both taking on the feds! Now, he fired off a letter to Homeland Security chief Janet Napolitano.

The letter from Senator Kyl reads, in part, "I am writing regarding recent comments made by John Morton, assistant secretary of Homeland Security, U.S. Immigration and Customs Enforcement, to The Chicago Tribune that his agency will not necessarily process illegal immigrants referred to them by Arizona officials. I'm asking for a clarification from you about Mr. Morton's comments. Has your policy for responding to inquiries from state and local law enforcement about the immigration status of individuals changed as a result of Arizona's new law?"

Karl Rove joins us. He is the author of "Courage and Consequence." Good evening, Karl.

KARL ROVE, FORMER SENIOR BUSH ADVISER/FOX CONTRIBUTOR: Evening, Greta.

VAN SUSTEREN: Well, Karl, it certainly looks with this letter from Senator Kyl that -- to Homeland Security Secretary Janet Napolitano, former governor of Arizona, that things continue to heat up.

ROVE: Yes. Assistant Secretary Morton's comments were unbelievable. This is the man charged with enforcing our immigration laws. And he says out of personal or political pique with Arizona over the passage of its law the federal government may not process illegals referred to them by Arizona law enforcement officials.

Look, across our borders -- in fact, in this country every day, literally hundreds if not thousands of individuals are referred by local law enforcement to the federal government as illegal aliens and processed - - taken into possession, taken into detention by the federal officials and processed. And for the man in charge of that process to threaten Arizona to say, We the federal government may not live up to our law enforcement obligation to take those illegals off your hands, is pretty remarkable.

VAN SUSTEREN: Well, I actually thought -- I was surprised even more so that the secretary of Homeland Security or maybe even the president didn't say, Look, you know, we are a nation of laws and we're going to enforce the laws. If the law's unconstitutional, so be it. We'll deal with it then and it won't be -- it won't be enforced. But to certainly just to sort of let a high-level government official -- but nonetheless, he's not the top one -- to say this and to dictate what the law was -- was surprising.

ROVE: Yes, pretty amazing. And look, here's the other thing. The federal law enforcement standard is nowhere near as strict as the Arizona standard. The Arizona law says specifically you can only ask about their immigration status if three conditions are met. One is they're part of a lawful arrest and detention or stop for another crime. Second of all, that there is a reasonable suspicion that they are not a U.S. citizen. And third, that neither their ethnicity nor their race can be used as a condition of reasonable suspicion. That's a much higher standard than the federal standard.

So who is Mr. Morton to be lecturing Arizona that he's not going to pick up illegals found by -- look, somebody that they find who's been arrested for another offense, they're not -- the federal government is not going to take that illegal, as they're required under law? I mean, this is just amazing.

And again, it shows how political this White House is. Do you think Janet Napolitano, if she were still Arizona governor, would be standing still to be told by an assistant secretary of the Department of Homeland Security that they wouldn't be responsible for taking illegals found by Arizona local law enforcement officials? She would be up in arms. And the fact that this man is still sitting in his office at the Department of Homeland Security says something either about Janet Napolitano's political attitude about immigration or this administration's attitude towards Arizona.

VAN SUSTEREN: Well, two things. You bring up Janet Napolitano when she was governor. We showed on Friday letters that she wrote when she was governor to Secretary of Defense Rumsfeld and former Homeland Security chief Secretary Chertoff in which she had a very -- she was very strong about the -- about the horrible problems that illegal immigration was creating for Arizona.

The second thing, Karl, that I think is sort of interesting is that President Obama, if you listen carefully to what he said in the Rose Garden last week -- he's a former constitutional law professor -- he never said this statute was unconstitutional. He merely said that it had the potential or the possibility to provide for racial profiling, which is true of every statute in the entire code. So I'm surprised that they let this man make this statement and at least not -- at least not have a little word with him.

ROVE: Well, and look, not to back down from it. I mean, it's one thing that he goes into -- that Mr. Morton, secretary -- Assistant Secretary Morton goes into an editorial board meeting in Chicago and says these things. It's another thing that the administration walks back and says, Of course we intend to. We've got have doubts about the law, blah, blah, blah, but of course, we're going to uphold the rule of law and enforce the requirements of the federal statutes.

But they didn't say that. And so, look, I have a -- I have a view of this. I think the president and the administration are treating this -- it's all about politics! This has nothing whatsoever to do with the law. It's about politics. It's about the president trying to stir up Latino voters to get them to vote Democrat in the fall.

How quickly has the administration moved through its review? I mean, they've seen this law for a number of weeks. I mean, Mr. Morton talked about, Well, we're undertaking a review. Well, how long is that review going to take? And why is the president coming to a conclusion before the review is done? I think this is all about stirring up, you know, Democrat votes and not about the law itself.

VAN SUSTEREN: Well, I think the president actually has reviewed it by virtue of his statements in the Rose Garden. So I think he actually -- I think the president did read the statute. He may be the one (ph). All right, now, President Obama's ratings, the Rasmussen daily presidential tracking polls -- are the president's numbers?

ROVE: Well, not good. In the Rasmussen, which is likely votes, it's down to 44 percent. And in the Gallup, which is registered voters, it's to 48 percent. So the president had a brief bump up after the health care bill, but now that has dissipated and the president is upside-down, particularly among likely voters, where -- who are going to -- who are going to decide the outcome of the fall elections.

Remember, last fall, in November, when the Democrats had such a bad day in New Jersey and Virginia and also Pennsylvania? The president's job approval then was 54 percent. It's 48 in the Gallup and 44 in the Rasmussen. And you know, we know something about polls, and that is that no president by the day of the election, his first mid-term election, was as good as he was at the end of the previous year. He was at 50 percent in Gallup at the end of last year. He'll be lower than that by election day. Not going to be a good, you know, sort of wind -- provide some wind to the sails of Democrats this fall.

VAN SUSTEREN: Health care -- 63 percent nationwide want it repealed.

ROVE: I think these two numbers are connected. I think the president's job approval on health care and the president -- and this number on repeal are connected. Look, this piece of legislation is the only big piece of social legislation starting back with Social Security all through Medicare, Medicaid, education reform, Welfare reform -- it's the only piece of major social legislation that passed on essentially a partisan vote and was opposed by the American people at the time of its passage.

And I think the administration misled itself by thinking, Oh, all we go got to do is put the president out, have him barnstorm the country. There'll be lots of good news that he can explain, and people will feel better about this bill. That's not how public opinion is formed.

What happens is, after this bill passed, people talked to their doctor, they heard from the nurse, they thought about it more, they talked to the employer, they heard about the additional bad news. We've got a couple of pieces of bad news that have emerged since this bill, little ugly surprises.

And that has all combined to make people less trustful of this legislation, and as a result, more down on it, and therefore, more down on the president for having pushed it through, particularly pushed it through in the way that he did with back -- you know, back-room deals, and you know, sort of late-night votes and legislation that was poorly executed, poorly framed, poorly written and had to be repaired almost immediately.

VAN SUSTEREN: All right, the Sestak issue -- The New York Times, I think, came out -- I think had a headliner (ph) blog that said, Trust (ph) me, is that we're not hearing from Sestak what was offered. I mean, he says he got something offered. And the White House says nothing was done inappropriate. We don't have the facts at all. How -- should they get out in front of this one fast? Or is it too late?

ROVE: Yes, look, this is stone -- no, it's stonewalling. The people of Pennsylvania are going to want -- it's a pretty extraordinary charge. They tried to bribe me out of the race by offering me a job. Look, that's a violation of the federal code, 18USC-600 says that you -- a federal official cannot promise an employment, a job in the federal government, in return for a political act. Somebody violated the law.

If this is -- if Sestak is telling the truth, then somebody violated the law. If he's not telling the truth, we need to know that, too. And the only way to know it is for two things to happen, Joe Sestak to say who offered him what job and then for the White House to provide that person to answer questions from the press to see if Sestak is telling the truth. This is a pretty outrageous charge!

VAN SUSTEREN: Karl...

ROVE: Yes?

VAN SUSTEREN: How is that different or similar to Governor Blagojevich being indicted for it? Now, we don't know the facts on Sestak. Let me underline that. But he's being charged with selling a seat, essentially. I mean, there's wheeling and dealing that goes on with politics, that goes by -- you know, this whole -- where is this line?

ROVE: Yes. Well, look, section -- USC -- 18USC-211 says you cannot accept anything of value in return for hiring somebody. Well, arguably, saying that -- providing a clear path to nomination for a fellow Democrat is something of value. And so there's a second part of the code that may have been violated.

There's a third part of the code, 595 -- 18USC-595 -- which prohibits a federal official from interfering -- a government employee interfering with the nomination or election for office. And you know, all three of these, but particularly 600. Joe Sestak said somebody offered him a job. That's a violation of law. If you'll get out, we'll appoint you to a federal office. That's a violation of the law. If he's telling the truth, he needs to come forward with the particulars of it and -- and -- so that the White House can defend itself and the American people can figure out whether or not he's participating in a criminal cover-up, along with federal officials.

VAN SUSTEREN: And of course, as long as no one tells us the facts, imaginations will run. So it would be really smart and wise...

ROVE: Sure.

VAN SUSTEREN: ... for them to get out with the facts. There may have been nothing wrong at all, but people's imaginations are running wild.

ROVE: Right.

VAN SUSTEREN: All right, Karl, stand by. We have much more because next, we got the feud, the feud between Governor Sarah Palin and White House Press Secretary Robert Gibbs. Who's your money on, on this one? We have it all caught on tape.

(COMMERCIAL BREAK)

VAN SUSTEREN: Former governor Sarah Palin and White House Press Secretary Robert Gibbs are firing missiles at each other! Governor Palin talking about the oil spill.

(BEGIN VIDEOTAPE)

SARAH PALIN, R-AK, FOX CONTRIBUTOR: I don't know why the question isn't asked by the mainstream media and by others if there's any connection with the contributions made to President Obama and his administration and the support by the oil companies to the administration, if there's any connection there to President Obama taking so doggone long to get in there, to dive in there and grasp the complexity and the potential tragedy that we are seeing here in the gulf of Mexico.

(END VIDEOTAPE)

VAN SUSTEREN: White House Press Secretary Gibbs firing back.

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: And Sarah Palin was involved in that election, but I don't think apparently was paying a whole lot of attention. I'm almost sure that the oil companies don't consider the Obama administration a huge ally. My suggestion to Sarah Palin would be to get slightly more informed as to what's going on in and around oil drilling in this country.

(END VIDEO CLIP)

VAN SUSTEREN: Karl Rove is back with us. Karl, boy, what a feud! And it looks like, I don't know, the White House seems to be taking a little bit of the bait. I think I'd probably lie low and let this one go away like ever dispute with someone who's not in office.

ROVE: Yes. Robert Gibbs just can't resist being swarmy, and you know, sort of snarky. And it's just his natural appetite. I have to say, though, I think there were stronger grounds on which Palin could have criticized the president. After all, in the 2008 election, employees of energy companies gave about $2.5 million to John McCain and gave less than $900,000 to Barack Obama.

Now, granted, British Petroleum is slightly different than the rest of the energy industry in that it gave more money to Obama than it gave to John McCain. But I -- you know, it's better to suggest, I think, to say the administration has made a mistake in its handling of the oil spill in the gulf. It has been too hand-offish (ph). It took the president too long to be engaged. And despite the very complicated, you know, time schedule that they gave out showing that the president was told this or this or that or that or that, the administration has not been on top of this. They've done a poor job of it. They've not been engaged.

You know, they are directly responsible for this. This is not a thing where the governor of Louisiana or the governor of Mississippi is in charge. This is drilling off in the federal outer continental shelf, and the federal government is in charge. And the president took a long time to get down there and looks to be -- the federal government looks to be, you know, sort of hands off, leaving it to British Petroleum to take the lead. In fact, if they're involved at all, it tends to be like the EPA administrator saying don't do things that you're doing that might have an effect in dispersing the oil. So I think there are stronger grounds...

VAN SUSTEREN: Karl...

ROVE: ... to be critical of the administration.

VAN SUSTEREN: How -- in light of (INAUDIBLE) criticism -- how is that different than the criticism the administration you worked for, the Bush 43 administration, in its response to Katrina? Because, you know, both -- both administrations have gotten -- are getting hit for the essentially slow responses and poorly executed responses.

ROVE: Yes. Well, remember, there are two different laws that govern this, however. The Stafford Act, which governs disasters like Katrina, says -- passed in 1988, says explicitly the federal government is not in charge. Governors get to make the decisions, and mayors. And the federal government exists to provide the -- to provide whatever resources the governors want and to write big checks. And it explicitly protects the right of governors to be the lead officials in disaster emergency services.

In fact, the only way that the federal government can take over a thing like Katrina is to -- is to do one of two things, either to be invited in, as President Clinton was invited in by Governor Wilson of California following the Northridge earthquakes, or to invoke the 1807 Insurrection Act, suspend the 1876 Posse Comitatus Act, and rely on provisions of the 1917 National Guard Act and take command of the situation. That's what happens in a natural disaster like Katrina.

In something like this, which is an oil well being drilled in federal waters off of -- you know, beyond the three-mile limit -- the states -- the states have authority up to about three miles, and after three miles, it's the federal government. It's the federal government that's in charge. They have to be the people who are taking the lead. Now, they may say it's up to the company to do this, but the federal government is in charge. They are -- they are the lead official, not the governor, not the mayor, the federal government.

VAN SUSTEREN: I guess that, you know, that's -- that's an interesting sort of description and comparing and contrasting. But I guess looking back to Katrina, my response to you is simple, Well, you know, you could have asked to go in sooner or -- you know, I'm wondering what the governors were saying.

ROVE: Right.

VAN SUSTEREN: To me -- to me, there's -- you know, we can -- we can split hairs on the law, but they both look like two administrations that didn't move fast enough.

ROVE: Right. Well, yes, you're right. Well, I write about this in my book in I hope what is revealing detail because the president of the United States literally had to call the governor of Louisiana and beg her to have the mayor of New Orleans execute his disaster plan as the state and the local government had written it. It called for a mandatory evacuation from New Orleans 72 hours before landfall. That would have been Friday morning.

On Sunday morning, the president's calling the governor, saying, I can't find the mayor. You need to call the mandatory evacuation because we are less than 24 hours away from this hurricane hitting southeast Louisiana. And half an hour later, they call the mandatory evacuation. And I give the story in my book about all the back-room negotiations we were doing to try and get control of the situation, again, having to rely upon these inadequate tools of the Stafford Act and being constrained by these other laws.

Finally, on Saturday, the president put federal troops in there, and I'm to this day convinced that we did so in violation of the federal law because we're not allowed to, under the Posse Comitatus Act, to have federal law -- to have federal -- the federal military involved in providing local law enforcement. And again, the Stafford Act says the governor is in charge, not the president.

VAN SUSTEREN: Well, that gives me another reason for me to go back to your book. I have a mind like a sieve. I read it once, but I'll go read it again, Karl, and...

ROVE: The chapter on Katrina.

VAN SUSTEREN: All right, well, definitely, I'll go back and read it. Like I said, I confess my mind's like a sieve. Anyway, Karl, thank you.

ROVE: Thanks, Greta.

Content and Programming Copyright 2010 Fox News Network, Inc. Copyright 2010 Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.