This is a partial transcript from Hannity & Colmes, December 23, 2003, that has been edited for clarity.

ALAN COLMES, CO-HOST: Coming up tonight is Al Qaeda recruiting women and children to carry out terrorist attacks? We'll have the shocking new details about how they recruit.

And one of the D.C. Snipers has been spared the death penalty. Did the prosecutors misjudge their own evidence, or is this just more proof that the death penalty doesn't work? That's coming up.

First, America remains at an orange state of alert, as local, state, and federal authorities prepare for the possibility of a terrorist attack.

FNC confirmed today that U.S. intelligence sources intercepted phone calls and emails from Al Qaeda suspects abroad, prompting the threat alert to be raised. And a report in the Los Angeles Times says that Al Qaeda may be planning attacks against rural targets as well as major cities.

But how solid is this intelligence and how worried should we be? Joining us now, the former deputy assistant director of the FBI, Danny Coulson.

Good to have you with us, Danny. Thank you for being with us.

DANNY COULSON, FORMER DEPUTY ASST. DIRECTOR OF THE FBI: Good to be here.

COLMES: Let me ask you about, you know -- Wesley Clark is saying it was a strategic mistake to shift resources to Iraq in the hunt -- instead of the hunt for Usama.

And is this evidence of that, the fact that Al Qaeda is reforming, we're on orange alert, we're hearing the same kind of chatter we heard before September 11? Does Wesley Clark have a point when he says that?

COULSON: I don't think so. This is not a one-front war. This is a war that will be fought on many fronts, on many levels. And we have the resources to do what needs to be done and the Iraqi war needed to be fought. And we needed to dispose of Saddam Hussein, and we can still go after Al Qaeda wherever they threaten us.

COLMES: What are we supposed to do? We hear Code Orange, and it frightens people. But what do we do about it?

COULSON: Well, I think we're doing what we're supposed to be doing. You have to remember that the alert was raised because we have intelligence now that tells us that we are under attack. We didn't have this capability before.

Right now the big concern is commercial aviation from foreign countries with pilots, either al Qaeda sympathizers or al Qaeda members, who would fly into our country and at the last moment divert from their intended route of travel, at least the report they filed, and attack some target that would be similar to the World Trade Center.

And that's what has really generated this alert is the general aviation threat which many of us have believed has been the biggest weakness in our security system for a number of months now.

COLMES: Let me go back to this issue of Clark's remark about a strategic mistake. I mean, should we not be focused on al Qaeda, on the very people who we know are responsible for September 11, who are still responsible for us now being at orange alert and are still in play in terms of the chatter we're hearing about damage that can happen to this country?

COULSON: Yes, we should be focused on al Qaeda. But al Qaeda doesn't constitute all the terrorists in the world. There are other kinds of terrorists. There are Muslim fundamentalists who hate us...

COLMES: Those are -- these are the terrorists we're now talking about as potential to doing us harm now, at this time.

COULSON: That's right, Alan. And you have to understand -- and I hope we can reach some sort of agreement here -- that there are many kinds of terrorists. Al Qaeda doesn't represent all of them.

And I think you'll see over the months that Al Qaeda will be fighting us in Iraq. I think there's no doubt about that. There's some recent intelligence that says that Al Qaeda is pulling out to a degree from Afghanistan and shifting resources to meet us on the battlefields of Iraq, and that may be, as a matter of fact, not so bad. We can -- at least we know where they are and we can find them.

COLMES: It's hard to make the case that Iraq is liberated, Iraq is free, when you have it becoming a battleground for terrorists, the centerpiece of the war on terror, as Paul Wolfowitz said.

COULSON: Well, I think one thing you have to understand is that we're not really seeing reporting that tells the American public what progress is being made there.

Schools are open. Banks are open. The economy is starting to develop and right now what you have is former Ba'athists and some outside terrorists attacking the Iraqi people.

And we have to focus on not only the problems there but the tremendous progress that has been made by U.S. soldiers and civilian contractors in Iraq that can make things better there.

It's a long war. It's going to take -- it will go beyond this administration and go beyond the next administration. It's difficult. We face an opponent that is dedicated and good at what they do, and they hate us with a vengeance. And we have to understand.

MONICA CROWLEY, GUEST-HOST: Danny, welcome to the program. Hi, welcome.

COULSON: They're really dangerous.

Hi.

CROWLEY: Hi, welcome.

I want to ask you about this national terror alert being elevated. It's been six months since that terror alert was last elevated, and certainly our intelligence services over those last six months have seen different threats come and go.

What's different about this time in terms of the nature and intensity of the kinds of threats we're seeing?

COULSON: I think there's specific information now. I think what they have is information that cells, groups have been launched against us and the only problem is they don't know what they've been launched to. And that's what's causing the great concern.

You have to understand, also, that not only did the national security alert go up. But the MARSAC levels, which are handled by the Coast Guard, have also gone up and that indicates that a lot of things are being done in the maritime industry because they, too, are concerned about an assault.

And you have to remember that al Qaeda likes maritime assaults. They bombed the Cole. They tried to bomb another United States war ship and they've attacked ships underway.

So they not only have the maritime capability, but of course they can work that along with their aircraft interests and we've got all kinds of problems to deal with here.

CROWLEY: Danny, what do you make of this report that al Qaeda is still interested in using airplanes as weapons?

COULSON: Well, al Qaeda tends to do what they've done in the past. And we've all thought that general aviation is a weakness, and the latest reports that the FBI is propagating indicates that they're concerned, again, of these general aviation-type planes that come up from New Mexico or possibly through Canada that can be diverted and used as missiles against our buildings or institutions or even like nuclear facilities or chemical warehouses.

So that's always a threat and that's, I think, the specific nature of the information now is causing this alert to go up and, frankly, it's good that we actually have that kind of information. We've not had that in the past.

CROWLEY: You know, we've made tremendous progress on security with regard to passenger aircraft. But I'm concerned about cargo aircraft because the security is not as tight with those cargo airplanes and also the potential use by al Qaeda for surface-to-air missiles to try to take out a commercial airliner.

COULSON: Those are significant problems. And it just goes to show you the difficult nature that we have in dealing with this threat.

Surface-to-air missiles are a danger. They're not 100 percent accurate. A surface-to-air missile against a civilian plane is generally not as effective as against a military aircraft, because civilian planes have their engines on the wings and they're designed to sustain damage outside.

Military planes have their engines inside the fuselage, so they're much more vulnerable to these types of attacks. But private cargo planes are a significant problem, especially those that come from overseas.

CROWLEY: Danny, is it possible that all of this increased chatter that we're hearing coming out of the intelligence services about al Qaeda, that this could be a decoy, that al Qaeda is setting us up, that all of this chatter about using aircraft or potentially using aircraft could be distracting us from what they're truly planning?

COULSON: Sure. Absolutely. And the intelligence services are very much aware of that. There was a lot of chatter before 9/11 that indicated that things were going to happen in another part of the world. They have to be alert to that.

Again, our enemy here, al Qaeda, and its fellow travelers, are very, very smart. And they know our system of government. They now understand our society. It could well be that they're putting this information out when they intend to hit us someplace else or in a different manner.

One of the things, if you see their training tapes, you see them using weapons assault against public places. That's not real complicated. They can also do that.

COLMES: Mr. Coulson, thank you for being with us tonight.

COULSON: Thank you very much.

COLMES: Nice to see you. Merry Christmas.

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