This is a partial transcript from "The O'Reilly Factor," June 29, 2007, that has been edited for clarity.

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MICHELLE MALKIN, GUEST HOST: In the "Unresolved Problem" segment tonight, as we mentioned before, there's speculation of a connection between the London terror plot and the recent knighting of author Salman Rushdie. Iran issued a fatwah against Rushdie back in 1989 after taking offense at how one of his books portrayed the Muslim prophet Mohammed.

So when the queen recently knighted Rushdie for his contributions to literature, radical Muslims took to the street, warning the honor might spark terrorism.

Bill recently spoke to the author of the book "The Trouble with Islam" about the controversy.

(BEGIN VIDEOTAPE)

BILL O'REILLY, HOST: Ms. Manji, from my vantage point here covering this stuff every day, it looks like the militant Muslim movement worldwide is getting worse, getting less tolerant, if they were ever tolerant at all. Am I wrong?

IRSHAD MANJI, AUTHOR OF "THE PROBLEM WITH ISLAM TODAY": In one sense, you're wrong, Bill. And that is that actually, moderate Muslims are in on the intolerance game as well.

Let's remember that the most vicious protests against Salman Rushdie in the late 1980's began in Britain, where most Muslims are middle-class. OK? So it's not just the militants who are involved here.

O'REILLY: All right, but now we have a Pakistani minister saying that hey, if somebody straps a bomb to Salman Rushdie's chest, it's OK because we have to defend Mohammed, Allah, whoever, but that rationale can be used to kill anyone.

MANJI: And you know what? It's a really mixed up rationale. And here's why. The Koran actually tells us that if somebody is mocking your religion, don't retaliate, walk away and only later engage in dialogue. So in fact, our so-called leaders are spewing prejudice that the Koran itself never asked them to.

And the other moral impairment that I want to talk about is the fact that last Sunday 35 Muslims, at least 35 I should say, in Kabul were blown to bits by fellow Muslims. And on Tuesday, at least 80 faced the same slaughter at the hands of so-called Islamic insurgents.

Where is the official denunciation of that offense to Muslim sensibilities coming out of Pakistan? I don't hear one. Instead...

O'REILLY: Well, but there doesn't seem to be...

MANJI: Instead, a self-professed atheist is at the top of the to do list. That is moral impairment.

O'REILLY: It doesn't seem to be any central authority. Like look — if you are a Roman Catholic, you have the pope. And he's in Vatican City. And then if you're orthodox, then you have a leader. In the Muslim world, you have Sunni, you have Shi'ia, you have all of this stuff. And there doesn't seem to be any central authority at all.

Now I subscribe that most Muslims in the world agree with you, that the Koran doesn't say murder. It says, you know, be a good person. But there are...

MANJI: But those Muslims are not speaking up about that, Bill.

O'REILLY: They're not. They're afraid.

MANJI: No...

O'REILLY: But there are...

MANJI: ...especially in privileged parts of the world like the West.

O'REILLY: OK. But the militant Muslim movement is growing in ferocity and threatening the whole world. And there's no central authority over it.

MANJI: I don't know that you need a central authority if you've got the Koran as a book that actually states...

O'REILLY: But they don't believe the way you believe. You're a Muslim woman. They don't believe. They would kill you.

MANJI: But let me -- but here's the thing, Bill. Let me even be a literalist about it. OK? Chapter 13: Verse 11: "God does not change the condition of a people until they change what is in themselves." What's not to understand about that call to take responsibility?

O'REILLY: But they don't understand it, Ms. Manji. They'd kill you in a heartbeat as an infidel. You're on “The Factor”. You're talking about Muslims in a way that's negative. They'd blow you up in a heartbeat. They don't care what the book says. It's not about the Koran. It's about a murderous movement that basically is out of control. It's out of control, is it not?

MANJI: But why is it out of control, Bill? And part of the reason is that reasonable Muslims are not breaking the deadly silences about it. That's why.

O'REILLY: Well, they'd have to fight them.

MANJI: Say that again.

O'REILLY: Reasonable Muslims would have to fight them. And they're not fighting them. I mean, that's not really fair because there are Muslims in Iraq that are, you know, fighting the al Qaeda and the other crazies there. There are.

MANJI: Absolutely.

O'REILLY: But...

MANJI: Of course there are. And I'm glad that you're standing up for them, but here's the point. In very comfortable places like the West where you and I are talking now, you know, we reform minded Muslims are not emerging from the woodwork in critical numbers in order to say "not in our name." You're right. We're intimidated. We're beaten down by fear. We fear causing shame and dishonor on our families merely by reclaiming the good name of God. And that is why I would argue that Salman Rushdie is not the problem here, sir. It is we Muslims who are a problem.

O'REILLY: Ms. Manji, thanks very much for talking with us today.

MANJI: God bless us all.

(END VIDEOTAPE)

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