WASHINGTON — Homeland Security Secretary Janet Napolitano faced off with lawmakers Wednesday on problems ailing the Southwest border.

Janet Napolitano

Homeland Security Chief Janet Napolitano testifies Wednesday on Capitol Hill. (Image from CBS News video)

A heated exchange erupted between Napolitano and Sen. Chuck Grassley, R-Iowa, the ranking member on the Senate Judiciary Committee, about allegations of DHS involvement in a controversial Justice Department operation called “Fast and Furious” that came to light because of a recent CBS News report.

The operation, run by the Bureau of Alcohol, Tobacco, Firearms and Explosives, allegedly allowed thousands of illicit weapons to cross the border into Mexico, falling into the hands of the drug cartels. The practice is known as letting guns “walk.” Normally forbidden, the intent is to see where they end up in hopes of defeating a major cartel.

Napolitano said she knew nothing about possible DHS involvement.

“I’m not aware of any particular agent,” she said. “I am aware of the ATF operation generally.”

Napolitano said it was confined to the Justice Department, but Grassley said so far he has received denials from acting ATF Director Kenneth Melson and Attorney General Eric Holder. Grassley has called for an independent investigation of the matter.

“I’d like to ask you how you feel about the fact that another agency’s decision put hundreds of guns into the hands of criminals of both sides of the border may have contributed to the death of Border Patrol Agent Brian Terry,” Grassley said.

New developments suggest that operation and “Project Gunrunner” could have contributed to Terry’s killing.

“My understanding is that the whole Terry matter is under investigation, including the source of the guns that were held,” Napolitano said in response. “It would be premature and inappropriate for me to comment on that right now.”

Terry was shot dead last December during an exchange with suspected illegal aliens near the border. Court documents say he and other agents first fired rounds of non-lethal beanbags, which the suspects returned with real bullets.

Napolitano said agents are allowed to use lethal force if “under threat of serious injury or death.”

Despite the controversy, she refused to give an outline of the time and efforts needed to secure the Southwest border, in response to a series of questions from Sen. John Cornyn, R-Texas.

Napolitano said she did not want a deadline to defer Congress’s focus from her department’s efforts. She said it was crucial DHS remain able to financially sustain border security programs.

“This will need to be a sustained effort over time,” Napolitano said.

Grassley was the first to say it’s out of line and ineffective.

“This department was created to defend our nation’s borders and infrastructure, yet as we look at the Department of Homeland Security today we see agencies failing to coordinate with one another,” Grassley said. “In short, what I see is approaching a level that some might call chaos.”

Napolitano’s $57 billion budget request for fiscal year 2012 – a slight increase from the current year – is on the line and she stands to lose significant funding if House-passed budget cuts take effect. Formed in 2002, DHS is today one of the largest cabinet departments.

She said the proposed cuts would force the firing of hundreds of Immigration and Customs Enforcement officers and decrease the overall security of the border by causing the department to slow the implementation of new technology and programs.

“We think we’re on the right path,” Napolitano said. “The numbers that need to go up are going up dramatically. The numbers that need to go down are going down dramatically.”

“We are not done,” she added. “We are continuing to work that border and work it hard.”

Napolitano on ATF “gun running”