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This is a RUSH transcript from "The O'Reilly Factor," August 25, 2010. This copy may not be in its final form and may be updated.

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LAURA INGRAHAM, GUEST HOST: Now on to the top story: the disconnect between the elites and the regular folks. According to a Rasmussen poll, 68 percent of the political class favor building the mosque near Ground Zero, but an overwhelming 77 percent of mainstream voters are opposed. And take a listen to how some elites have tried to frame the debate.

(BEGIN VIDEO CLIP)

ANDREA MITCHELL, NBC NEWS: Some would say that it is really for Americans, for majority Americans to be more sensitive to minority communities. It's not merely the obligation for the imam.

NORAH O'DONNELL, NBC NEWS: Somebody's got to say that, you know, we're not going to act like the people who stole freedom from Americans, the people who attacked America and killed 3,000 people.

MARK HALPERIN, NBC NEWS ANALYST: The families of the victims of 9/11, whatever emotions they want to have, I respect and I honor. But somebody needs to lead them through a discussion.

KATIE COURIC, CBS NEWS: There is a debate to be had about the sensitivity of building the center so close to Ground Zero, but we cannot let fear and rage tear down the towers of our core American values.

MICHAEL BLOOMBERG, NYC MAYOR: If we say that a mosque or a community center should not be built near the perimeter of the World Trade Center site, we would compromise our commitment to fighting terror with freedom.

(END VIDEO CLIP)

INGRAHAM: Joining us now from Stanford, Connecticut, the purveyor of DickMorris.com, Dick Morris. Now, Dick, that was a painful montage to sit through, OK? To hear elite after elite after elite characterize this debate as our burden to show our own kindness, sensitivity and tolerance when there's clearly not an obligation on the other side to show the same level of tolerance.

DICK MORRIS, POLITICAL ANALYST: But it isn't even that. This mosque has nothing to do with religious freedom or tolerance. People don't understand the fundamental nature of Islam. Islam is a juridical religion, just like Judaism is. And Orthodox Jews, who study for the rabbinate, essentially going to law school in studying Talmudic law, and they are there to guide worship, but they're also there to adjudicate disputes under Talmudic law.

Now Talmudic law is wonderful and it is nonviolent and it's all of that. But under Islam, the imams are there in charge of applying Sharia law. And don't think of it as a mosque. Think of it as a law school in Sharia law where they recruit people, train them, indoctrinate them in it. And Sharia law has contained within it not just this horrible, vicious abasement of women, which is revolting throughout it, but it also has jihad and suicide bombing and terrorism built right into the structure.

INGRAHAM: Well, Dick, let me tell you what imam Faisal has said in the past and try to give another point of view here. Obviously, I'm where you are on this issue. But he says that, look, his view of Sharia is encouraging self-dignity, independent thought, love for your brethren, harmony, peace, the love of also the American culture. I mean, he thinks that the United States is "Sharia compliant." But when people question him about that, he basically says no, no, no, no, you're misunderstanding what Sharia means to him, the imam Faisal. That's what he says.

MORRIS: Well, I don't know what rose-colored glasses he's using to read Sharia law, but it explicitly embraces jihad and suicide bombings, self-sacrifice and slaying the infidel. It's a crucial part of it.

INGRAHAM: So why is Barack Obama letting this go on? Why is the president of the United States at his already low approval numbers, why is he letting this continue as it is?

MORRIS: Yes, I don't know, Laura. That's a question for a shrink, not for a political adviser. He's out of his mind for doing it.

But the point I want to make is that the Center for Security Policy, run by Frank Gaffney, did a study of 100 mosques in the United States. Twenty of them were religious institutions where Sharia law was not present, and nobody talked about it. They talked about worshiping God and loving God. And those are great. I wouldn't mind if you have one right on Ground Zero itself.

The other 80 were Sharia institutions, which is what this mosque is going to be, essentially a law school to study Sharia law and spawn adherence and devotees. The reason the radical Muslim community is so anxious for this thing to be built is because they want to counter the assimilationist tendencies of Muslims in the United States.

INGRAHAM: Oh, of course they do.

MORRIS: And make them the same…

INGRAHAM: So what do you propose happen though, Dick? I mean, if…

MORRIS: …center for terrorism...

INGRAHAM: …let's say everything you are saying is correct and Gaffney has it spot on, what do we as Americans do?

MORRIS: Well…

INGRAHAM: Do we go mosque to mosque and say, OK, well, you're teaching that, you're teaching this. This gets shut down. This is allowed to stay. What do we do?

MORRIS: There's one very specific thing that we can do, and I hope your viewers rally behind this. Every one of the major financial institutions tries to set up a Sharia-compliant fund, where their investments don't go in anything that violate Sharia law, including, for example, the defense industry because it makes weapons for Israel. And the boards that administer those are the most radical Islamist fundamentalists in the world. And they determine who gets the charities and who gets -- in effect the Muslim tithing, which is 2.5 percent of your assets. And AIG has such a fund. But AIG is no longer privately owned. It's owned by the American taxpayer. So, Center for Security Policy is supporting a lawsuit -- CenterforSecurityPolicy.org -- to challenge the constitutionality…

INGRAHAM: Yes.

MORRIS: …of the Sharia fund of AIG, saying that it's an action of the American government because the government owns AIG, and it violates separation of church and state. Get behind that lawsuit. Contribute money to them and help them.

INGRAHAM: OK, all right, that's interesting. The bottom line is we have a lot of Muslims living in the United States who are law-abiding. They don't buy into a lot of this stuff, and they're seeing this, and my concern is that they need to be brought into the fold more, not alienated more.

MORRIS: Right.

INGRAHAM: So how do we as non-Muslims reach out to them? Many of them are conservative. They're pro-life. They're pro, I guess, traditional marriage for the most part. How do they get brought in more?

MORRIS: The way we do it is we differentiate between religion and Sharia. The enemy here is Sharia, not the Islamic religion. And there are plenty of Muslims, the vast majority of them do not live their lives strictly according to Sharia. They may not eat pork. They may not drink, but they don't go around killing people. They don't embrace jihad. They don't embrace the duty to slay the infidel. And what we should be doing is encouraging the construction and propagation of mosques that do not teach Sharia. The Saudis, on the other hand, want to push the Sharia mosques. What you have to do is understand the enemy is Sharia, not Islam.

INGRAHAM: Yes, all right. Dick, we appreciate it.

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