This is a rush transcript from "Hannity & Colmes," December 11, 2008. This copy may not be in its final form and may be updated.

ALAN COLMES, CO-HOST: This is another FOX News Alert. We are monitoring a second major news story tonight. President-elect Obama addressed the Illinois governor scandal earlier today and this time used much stronger language to firmly deny any involvement in a deal over his Senate seat.

(BEGIN VIDEO CLIP)

BARACK OBAMA (D), PRESIDENT-ELECT: In terms of our involvement, I'll repeat what I said earlier which is I had no contact with the governor's office. I did not speak to the governor about these issues. That, I know for certain.

What I want to do is to gather all the facts about any staff contacts that — that may have taken place between the transition office and the governor's office, and we'll have those in the next few days, and we'll present them.

But what I'm absolutely certain about is that our office had no involvement in any deal making around my Senate seat. That, I'm absolutely certain of. And the — that is — that would be a violation of everything that this campaign has been about, and that's not how we do business.

(END VIDEO CLIP)

COLMES: The president-elect reiterated that Blagojevich should resign, but despite the going chorus of politicians and newspapers calling for the governor's resignation, Blagojevich is not giving any indications that he plans to step down.

In fact, his spokesman is telling reporters the governor seems like he's in a good mood and trying to return to normalcy adding that he hasn't talked about resigning and has made no mention of what he will do about Obama's vacant Senate seat.

Here with reaction are two men very familiar with Illinois politics. The former Illinois congressman who actually lost his seat to Blagojevich in 1996, Michael Flanagan, and former Illinois senator, Peter Fitzgerald.

Welcome, both of you, to "Hannity & Colmes."

Video: Watch Sean & Alan's interview

Mr. Flanagan, let me start with you. So you ran against him. Can you explain the behavior? It's kind of odd that he's acting like nothing's wrong the day before this broke? He was saying let the sun shine on me and feel free to tape my conversations.

What's going on here?

MICHAEL FLANAGAN (R), FMR. ILLINOIS CONGRESSMAN, LOST HOUSE SEAT TO BLAGOJEVICH IN '96: Well, I think Rod is a — from the Chicago culture where we do what we do, the rules don't apply to us, and I truly believe that he doesn't think he's done anything wrong.

It's not that he hasn't done anything wrong in the sense that I'm not going to get caught or it's not going to happen to me. In the sense I've been doing this my whole political career, everyone I know does this, how can it be wrong, it's not wrong. All I was doing was talking. I never actually took any money, and until that happens I'm OK.

I think he's...

COLMES: He has no sense that he was caught on tape saying these things that are horribly damaging to his future, his career as (INAUDIBLE) to stay as governor?

FLANAGAN: I think he understands that it's horribly damaging, but I don't think he's done anything — in his mind he's done anything that's going to send him to...

COLMES: Senator Fitzgerald, should he resign?

PETER FITZGERALD (R), FMR. ILLINOIS SENATOR: Absolutely. He should resign. I guess I'm struck that Governor Blagojevich was so brazen when he knew he was under investigation by the federal authorities. He was continuing to carry on, and actually attempting — appearing to attempt to carry out a scheme to auction off Senator Obama's and even my former Senate seat, I preceded Senator Obama.

COLMES: Uh-huh.

FITZGERALD: He absolutely should resign. You have to question his fitness to serve if you read the affidavit that back the charges that backed up his arrest. It appears that really he has some serious even mental problems.

COLMES: Senator, you yourself ran as a reformer, you had — you didn't cling to power exactly, in fact, you were happy to leave your seat when, you know, you were not in good with your own party. You stood up for what you believed in, and that actually hurt you in some senses politically.

That's not the reputation, unfortunately, Chicago politics has.

FITZGERALD: Well, I found I had to fight corruption at every turn as senator from Illinois, and it took a lot of effort. Sometimes I had to fight members of my own party, and I had a very big battle to appoint Patrick Fitzgerald, the still U.S. attorney in Chicago.

I had both Republicans and Democrats opposed to his appointment because he wasn't an insider from the Chicago political culture. I was very concerned that whoever be the U.S. attorney in Chicago not be a pal of the mayor or the governor, that he not be subject to influence or pressure by some of the people whose behavior really needs to be policed there.

And for whatever reason, you know, Illinois actually led to the adoption of the 17th amendment that required the direct elections of U.S. senators back in the early part of the last century, a congressman in 1908 bribed the Illinois legislature, gave them each $1,000 to vote for him, his name was Billy Lorrimer for U.S. Senate.

SEAN HANNITY, CO-HOST: Hey.

FITZGERALD: ... and after that came out — they actually expelled him from the U.S. Senate.

HANNITY: Michael, let me ask you this. We know that Barack Obama was a key advisor for Blagojevich in his last gubernatorial run. What do we know about the nature of their relationship?

FLANAGAN: I don't think we know much, and I don't think we're going to find out much unless Blagojevich or Obama tell us about it. I'm prepared to take the president-elect at his face value saying he didn't know anything about it, but he can't make that claim for the people around him.

This is...

HANNITY: Yes.

FLANAGAN: Axelrod and that crowd elected Rosty, they elected Blagojevich, they elected Obama. It's not the same group of people, it's the exact same warm bodies, and they are waist deep in how Chicago works, and there's just not a chance.

HANNITY: But, then let me.

FLANAGAN: ... that the people around Obama are — without any knowledge at all.

HANNITY: I think I speak for most Americans. The concept or the idea that a sitting governor of a major state or any state, you know, would attempt this — you know pay to play scheme where he's trying to sell a United States Senate seat is beyond the pale.

But you know what, there are a lot of things that I discovered about, quote, "the Chicago way" during this campaign that I found troubling. This goes back to, well, I went to Wright's church because it was politically expedient for 20 years.

You know, you start your campaign in the house of Ayers and Dohrn. And I'm not implicating Barack Obama here. All I'm saying is I don't understand the Chicago way.

Why is this seem to be acceptable in Chicago more than any other place?

FLANAGAN: It's a great question, and I think — I think the answer is simpler than — it doesn't require a battery of psychologists to figure it out. It's one party rule that has gone on for decades and has devolved into insane taxes, crazy bad social services and an unbelievable culture of corruption, to borrow the term from Nancy Pelosi, that is pervasive.

Chicagoans have become so used to it they almost brag about it. But they — it's for a complete lack of alternative. I mean some of the faults at the feet of the Republican Party that simply won't mount their urban effort anywhere in this country, but a lot of it has to be at the fault of the people who have done this.

HANNITY: All right, guys. Thanks for being with us. We appreciate it.

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