This is a rush transcript from "On the Record," October 23, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: A big White House scoop about a shakeup at the White House. Earlier, we spoke with Bret Baier, who is host of "Special Report."


VAN SUSTEREN: Some fascinating late night news tonight from the White House. The White House counsel?

BRET BAIER, HOST, "SPECIAL REPORT": Yes. Major Garrett broke this story today that White House counsel Greg Craig is expected to leave, according to sources, by the end of the year, possibly sooner, and that a top candidate to replace Greg Craig is Robert Bauer, who is the president's personal attorney. He's also chief counsel to the Democratic National Committee and he's also the husband to the interim White House communications director, Anita Dunn, who of course, was at the center of all of the back-and-forth between the White House and Fox News at the beginning.

So it's not a done deal, according to Major's reporting...

VAN SUSTEREN: Not to make a pun!

BAIER: Yes, right, not to make a pun -- but that Bauer will get it, but his indications are that he's the top candidate, which is pretty interesting.

VAN SUSTEREN: I think it's intriguing. I mean, it sort of looks like, you know, the wagons are circling. And even this bit about Greg Craig -- probably pushed out. Probably?

BAIER: Well, you know, they'll obviously paint it a different way, but Greg Craig was at the center of the decision about Guantanamo Bay and how that prison was going to be closed down and the president coming out saying, It will be closed, you know, one year from today, when he made that announcement. I think it was on January 22nd. They're likely not going to make that deadline. In fact, officials say there's probably no way. Attorney General Eric Holder said it's going to be very difficult. And Catherine Herridge has been reporting there's just not going to be a solution by then.

So a lot of people put the blame on Greg Craig. He has defended himself in public and said he's not -- doesn't have any plans to leave, but our sources are telling us that he's going to leave the White House by the end of the year.

VAN SUSTEREN: And how cozy Washington is because Greg Craig is part of the intrigue with the Clinton -- former president Clinton and Secretary of State Clinton because he went rogue. He used to be tight with them, and then he went with Obama.

BAIER: Yes. I mean, obviously, as you know, it's a very close-knit community on both sides of the aisle in Democrat and Republican politics here. So there's a lot of deep roots. Greg Craig goes back a lot of ways in different campaigns.


BAIER: But he factored in big in the Obama campaign.

VAN SUSTEREN: Well, this'll be -- add to more palace intrigue we'll get in the next couple days. All right, health care. What's going on with Speaker Pelosi? Is she going to get the public option on the House side or not?

BAIER: Well, you know what? She's counting votes right now, we're told by our producers up on Capitol Hill, and she's counting them and not coming up with the most robust public option. So they're going to have to scale it back in some way, shape or form.

The big issue is what happens in that conference committee, as we've talked about, when the Senate and the House come together and they come with their -- all of their bills together. Right now, the compromise piece of legislation, the Senate Finance Committee bill, as you know, is a long, long way from the House legislation as it is right now.

So right now, as House Speaker Pelosi counts those votes, she doesn't have it. What happens in that conference committee, though -- there's a long, long way to go.

VAN SUSTEREN: When you think of it, though, the job of Speaker of the House, especially this one -- I mean, you know, she's sort of in the driver's seat because she's the Speaker of the House, but it's such a huge House. There's so many Democrats. It's like herding cats. And she certainly has her position. She wants the most liberal -- she wants a robust public option. But she's got to deal with the moderates.

BAIER: Yes, the Blue Dog Democrats. These are people who won in red states, some of them, conservative or moderate districts, and they're worried about reelection. Some of them went out on a limb for cap-and- trade legislation that they were taking hits -- they are taking hits from their opponents currently in these districts. And they're worried about how they're going to vote on health care and whether they'll have cover if, in fact, it goes through.

Everybody's counting votes. Senate majority leader Harry Reid is counting votes. He's leaning towards a public option that allows states to opt out if they want to.

VAN SUSTEREN: Is that like public option lite?

BAIER: Basically. And as is Speaker Pelosi reportedly thinking about a trigger, which is what we've heard from Republican senator Olympia Snowe, which would mean that if insurance companies don't meet a certain bar, that that would trigger the push option or the government-run health insurance option.

VAN SUSTEREN: But even that, though, that -- that's the sort of the lighter version. And she's got to go back to her district sometime, which certainly doesn't -- the California, San Francisco district certainly wants the more robust public option than lite.

BAIER: Sure, but...

VAN SUSTEREN: So is that sort of a political defeat for her or not?

BAIER: Well, no, because Democrats -- at the end of the day, the White House will say, We need this legislation. We have to have it for the future of the Obama presidency. It's the number one priority for President Obama. And Democrats will have to decide whether they're going to go halfway or go all the way.

And I think when you talk about a trigger, it still opens the door to a public option or government-run option, depending on how the bar is set and how high those insurance companies have to jump.

VAN SUSTEREN: So what can she offer the Blue Dogs to get the votes? I mean, what -- take me behind the scenes. I mean, how do you get those votes if, you know -- how do you -- how do you persuade them? What can you -- what can she offer them?

BAIER: Money for campaigns, appearances, some of them -- President Obama doesn't help in some of the most conservative districts perhaps, but a number of people could help. The House majority leader, Steny Hoyer, could campaign. A lot of this horse trading goes on to help these individual candidates. And they're all concerned about one thing, getting reelected.

VAN SUSTEREN: Is there any possibility at all, I mean, looking down the road, that this health care bill won't get passed in some form?

BAIER: I think there are still some speed bumps along the way. I really do. I still think...

VAN SUSTEREN: Barriers or bumps? I mean, there's a big difference. I mean, could they -- could they slam and hit the wall, or I mean, something's going to get passed or...

BAIER: Something will get passed. Some piece of legislation will get passed. The president will sign something. It's very likely. But as it stands now, there are still a lot of hurdles, whether you call them speed bumps or not, for Democrats to push through what they want to push through. I think there could be some real problems in the Senate, when you get down to counting conservative Democrats, because that's where it comes down to, the Ben Nelsons of the world, the Mary Landrieus of the world. That's where it comes down to.

VAN SUSTEREN: But it's interesting how, you know, the president wanted to bring this under $900 billion, and the CBO says the bill is under $900 billion. But in order to achieve that, they had to sort of slice off certain extra bills, like paying the -- that doctor bill was going to cost about $250 million. So rather than adding it onto the health care reform bill and going over the threshold of $900 billion, they make these separate bills, these separate side deals. And you know, for some reason, I would think that the American taxpayers, they must be sitting at home thinking, like, you know, What's with that? I mean, Why don't you give it to us straight?

BAIER: Oh, yes. I mean -- and what this has done is open up the door to a lot of people who didn't know the process of, Hey, look over here, we're going to take this over here and pass it out of the bill to try to pass a bill that's under a trillion dollars. But in reality, when you add it all together over 10 years, it will be much more than a trillion, $1.8 trillion in some estimates.

VAN SUSTEREN: All right, the Democrats aren't going to get everything they want. Are the Republicans likely to get something they do want?

BAIER: Well, they may -- they may get something on medical malpractice, some kind of mention. They may get some kind of program, like a test program. They may get some -- you know, it's not -- it's yet to be seen what Republicans could get because they're really not at the table behind that closed door. And when you...

VAN SUSTEREN: Which is sort of unusual, when you think about -- I mean, the whole idea of being bipartisan -- it really isn't, at this point.

BAIER: Not behind that closed door in the negotiation. And the only hope that Republicans have is that conservative Democrats would fight for some of the same issues that perhaps they would advocate for.

VAN SUSTEREN: And of course, the plot thickens. And next week, we'll see where we're headed.

BAIER: Yes. It's fascinating.

VAN SUSTEREN: It is. Thank you, Bret.

BAIER: OK, Greta.


Content and Programming Copyright 2009 FOX News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2009 CQ Transcriptions, LLC, which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon FOX News Network, LLC'S and CQ Transcriptions, LLC's copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.