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This is a RUSH transcript from "The O'Reilly Factor," December 09, 2011. This copy may not be in its final form and may be updated.

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BILL O'REILLY, HOST: "Fridays with Geraldo Segment" tonight; let's bring in the anchor of "GERALDO AT LARGE" seen weekends at 10:00 p.m. to analyze the Mexican cartel situation and the FBI's involvement. Geraldo is in our New York studio. So what say you about this?

GERALDO RIVERA, FOX NEWS HOST, "GERALDO AT LARGE": Well, there are two stories here, Bill. The story south of the border and the story here in our country, which is the most relevant story to us. And thank God we have not yet seen a spike in violence along the southern border due to either undocumented immigrants or due to the Mexican drug cartel violence. Not yet.

In Texas, New Mexico, Arizona, southern California, in areas where undocumented immigrants, illegal aliens, if you would, live and are concentrated, the crime has actually dropped. And there are several studies suggesting... here's one, illegal immigrants involvement in criminal activity to reduce interaction with law enforcement.

So that's the story north of the border. Now jump cut to what's happening down south.

As you know, President Calderon has used his armed forces. He has unleashed the power of the federal government against these Mexican drug cartels. So far it has been a disaster, sadly, for Mexico. The dead bodies are piling up. The... 2010 was the worst year ever, over 15,000 dead, more than 40,000 dead totally nationwide, since this war, this campaign against the Mexican drug cartels began.

It is a national security threat. Mexico is on the verge, some say teeters on the precipice of becoming a failed nation.

Calderon's term is up next year. There's a worry that the incoming president will not pursue the drug banditos nearly as aggressively. We are doing the best we can, and cooperation has increased with Mexican authorities. We are now using our drones, our unarmed civilian drones to spot some of the smugglers, to spot some of the other criminal activity.

But I must say, south of the border, the situation teeters on the brink of disaster.

O'REILLY: All right. Now, the FBI, not a narcotics agency, although they do drug... big drug cases, obviously is involved with trying to do, what? What do you think is... I don't want to speculate but this Gaona, he's a bad guy.

RIVERA: You can speculate he... definitely. And you can speculate, because we have the example set from bad guys going back to the mafia, to other organized criminals. It takes a thief to catch a thief. We often use the worst, you know, the dregs of society, because they hang out with the other dregs, snitch them out to benefit their own outcomes of their own criminal cases.

This seems to me a cut-and-dry case of the FBI doing something for the so-called greater good. You know, putting at risk... in this case, the crime was committed against the man who was essentially the brother-in-law of the perpetrator here. It was a case, really, more than anything else of domestic violence. He rapes his own wife. He gets charged with sex assault. She doesn't press charges, because you know how difficult it is in these domestic violence.

O'REILLY: Right. She's afraid of the guy.

RIVERA: Of course.

O'REILLY: She's afraid of him and... see, what's the FBI's responsibility, once the guy gets into a beef like that, all right, which is a serious beef? What is the FBI's responsibility? Shouldn't the FBI cut him loose at that point and say, "Look, we can't have this guy running around raping and murdering people because we need information"?

RIVERA: It would seem to me that one of the most practical implications from this tragedy is that the family of the slain woman would have a major lawsuit against the federal government, because this... this perp was being held on immigration hold. He was going to be deported following the charge on sex assault.

O'REILLY: For the third time. For the third time.

RIVERA: All of that is absolutely true. And now the FBI has to explain to this family and to the rest of us, you know, what their responsibility should be. Because they, you know... they are the ones who gave him all that he needed to kill his...

O'REILLY: We have all... we have all the respect in the world.

RIVERA: ... brother-in-law.

O'REILLY: Right. We have all in the respect in the world, and I know you do too, Geraldo, for the FBI and the DEA and all the federal agencies. But you know, you've got to really make these tough decisions. If somebody gets involved in a felony, you've got to cut them lose. You've got to let the locals deal with it.

RIVERA: It's not the first time, brother, as you know.

O'REILLY: I know that.

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