The following is a rush transcript of the July 20, 2010, edition of "Special Report With Bret Baier." This copy may not be in its final form and may be updated.


SHIRLEY SHERROD, FORMER USDA DIRECTOR IN GEORGIA: They harassed me as I was driving back to the state office from West Point, Georgia yesterday. I had at least three calls telling me the White House wanted me to resign.

UNIDENTIFIED MALE: So the pressure came from the White House?

SHERROD: And the last one asked me to pull over to the side of the road and do it. She said, "Well, Shirley, they want you to pull over to the side of the road and do it, because you're going to be on 'Glenn Beck' tonight."


BAIER: Shirley Sherrod -- she lost her job as the Department’s Georgia director of rural development for the USDA. She says the deputy undersecretary of agricultural Sheryl Cook was the person who told her to pull over to the side of the road and to Blackberry, to e-mail in her resignation because of that video that surfaced on the web in which she said it was taken out of context, and she basically was telling a story about 24 years ago, and a story of racial reconciliation.

OK, here is what the USDA said in a statement, the Department of Agriculture, the secretary Tom Vilsack saying today, after all of this came out, "The controversy surrounding her comments would create situations where her decisions, rightly or wrongly, would be called into question, making it difficult for her to bring jobs to Georgia. Our policy is clear. There is zero tolerance for discrimination at USDA and we strongly condemn any act of discrimination against any person."

This is after she said it was taken out of context. The NAACP released a statement last night immediately after the video hit and she resigned, saying "Racism is about the abuse of power. Sherrod had it in her position at the USDA. According to her remarks she mistreated a white farmer in need of assistance because of his race. We are appalled by her actions just as we are with abuses of power against farmers of color. Her actions were shameful."

They spent the day reviewing the tape, they said, the NAACP, and just a few minutes ago they came out with this statement. "We have come to the conclusion we were snookered by FOX News and tea party activist Andrew Breitbart into believing she had harmed white farmers because of racial bias. Having reviewed the full tape and spoken to Ms. Sherrod and most importantly heard the testimony of white farmers mentioned in the story, we now believe the organization that edited the documents did so with the intention of deceiving millions of Americans. The fact is the Ms. Sherrod did help the white farmers mentioned in her speech."

And she did. The family has spoken out today about that. Fox News didn't even do this story. We have didn't do it on "Special Report." We posted it online. It's an amazing turn of events here. Let's bring in the panel, Juan Williams, news analyst for National Public Radio, K.T. McFarland, FOX News national security analyst, and syndicated columnist Charles Krauthammer. Juan, what about this?

JUAN WILLIAMS, NEWS ANALYST, NATIONAL PUBLIC RADIO: You know this happened 24 years ago. She mentions it as a story of reconciliation, as you describe it, Bret in a March speech.

That segment in which she talked about struggling with the white farmer, feeling the white farmer was talking down to her about possibly not giving the full force of her efforts, was a simple element in this larger story of how she comes back and helps the man greatly.

Now, it's then the case that she says that she feels that the NAACP and the fight with the tea party over whether or not there is racism within the tea party jumped the gun and started to put political pressure for her resignation on people like Agriculture Secretary Tom Vilsack. Vilsack and the White House apparently responded to this political controversy and the possibility of charges of racism against somebody in the Obama administration.

I want to remind you, this story took place 24 years ago. She was not working for the government at that time. She was working for a Georgia rural cooperative at that time. Now in her current position, Vilsack and the administration are acting as if they are wearing a (inaudible) over any racial issue, decided she has to go. I agree you don't want to tolerate racism whether it’s a white person against a black person or a black person against a white person or anybody against anybody. No, racism. But I think this story has been thoroughly screwed up. The NAACP, I will give them credit, they were snookered, and they acted rationally and --

BAIER: Not by Fox News.

WILLIAMS: No, they said they were snookered by Breitbart.

BAIER: And Fox News.

WILLIAMS: I don't know --

BAIER: They put out the video. The video also said, Juan, in one part of the video she says back in March 27th in the speech, "That's when it was revealed to me that it's poor versus those who have. It's not so much about white, white and black. But it opened my eyes."

K.T., it says that in clip that online for the entire day. The White House acts quickly and has her forced resignation, and the NAACP acts quickly and says it's appalled.

K.T. MCFARLAND, FOX NEWS NATIONAL SECURITY ANALYST: Now we see what the White House does, do they change their mind like the NAACP? Two wrongs don't make a right. The Justice Department refuses to prosecute the Black Panthers, but yet on the other hand now they have railroaded a woman into a resignation.

When as you point out, this was an act of courage on her part. If it's true that the tape shows that it's reconciliation on this, we should be celebrating her. The other thing is wasn't it a year ago we had the beer summit where we were all sitting down together and talking? And now we're in a racially charged atmosphere?

BAIER: Charles, one of the elements of this is that the administration is looking at poll numbers. The FOX News opinion dynamics poll, President Obama's approval rating among whites, disapproval, 54 percent, approval 36 percent. "Washington Post"/ABC News poll, Obama disapprove 56 percent, approve 40 percent. The White House is saying that they did not pressure the USDA. This was Secretary Vilsack's decision. Be there is, you believe, a broader context to all of this action with this woman.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: First I want to say I always suspected that Fox News was the root of all evil, so now we know it's true.

That was a remarkable statement from the NAACP. They obviously reacted without knowing that this had happen a quarter century ago in the original statement, and they seemed to be under the impression it happened while she was at the USDA. And the Obama administration, they didn't speak to her. She said herself in the interview nobody spoke to her, no one from the USDA or the NAACP spoke to her. She is owed an apology, a restitution, and the restoration of her job. I don't think there is any question about that. It is a heart-warming story of what happened. In fact, the act she's repenting and recounting is an act she didn't do as much as she might have. It isn't that she had perpetrated some racial assault on anybody. It was withholding which she then repented, undid by her deeds, became a friend of the family. It is a heart-warming story. She did say, interestingly, herself, she said this is because of what the NAACP did in attacking the tea party, which it did egregiously --

BAIER: Said it in an interview today.

KRAUTHAMMER: In the interview, because obviously I think it was done egregiously, gratuitously, and without any support. But it was done because I think it's mostly an irrelevant organization looking to make news and make a splash and to remember the old days where there was actual racism, which it attacked courageously. Now it's creating it.

But as a result of that provocation, she was essentially saying the NAACP had to undo it by then throwing her under a bus without even looking at her case. I think her analysis of that is entirely right.

BAIER: Down the road, does she get her job back? How does this end? Juan?

WILLIAMS: She doesn't get her job back. I just want to pick up on something you said quickly, which is I think the fact that white voters are buying off of Obama in big numbers is becoming a political hot potato right now. It's very dangerous thing to play with the politically our country. I don't think the racism is thing of the past, and the president is black. This is dangerous, but dangerous for both sides.

KRAUTHAMMER: But the implication is that the opposition of whites is because of race. That's what the NAACP is saying about those who spontaneously come together in the tea party. That's not about race. It's about the Obama agenda.

I reject those charges that somehow if you oppose an agenda and he's honest and open with it, that somehow it has to be --

WILLIAMS: Charles, I agree with you. I have written that the tea party is about opposition to high taxes, government expansion, and the like. Part of this though has to do with the fact when you look at white America, it's an older group, and healthcare in particular is not popular with people who are older white Americans.

BAIER: Obviously --

KRAUTHAMMER: It's ideological and not racial.

WILLIAMS: I agree.

BAIER: We will talk about this again. Obviously this is politically sensitive for this administration, and we will follow it here on Fox News Channel, we promise you.

We know a lot of you are watching online right now, surfing the web. Go to the homepage at FoxNews.com/specialreport for our part two of the series on labor unions from correspondent Mike Tobin. Next up, as the Washington Post lays open the intelligence community, the president's pick is the new head man goes before Congress.



LIEUTENANT GENERAL JAMES CLAPPER (RET.), NATIONAL INTELLIGENCE DIRECTOR NOMINEE: One man's duplication is another man's competitive analysis, so there is a certain amount of that that does go on, which I do think is a healthy check and balance. That's not to say, sir, I would not assert that this is completely efficient and that there isn't waste. There is.


BAIER: The president's nominee to be the new director of national intelligence talking about a Washington Post series of reports in which they found among other things more than 1,200 government organizations are working on intelligence, 1,900 private companies also working on intel, some 854,000 people with top secret security clearance, and more than 13 major departments and agencies make up the intelligence community.

There was concern about this series and the website accompanying it as well.


CLAPPER: I must say I'm concerned about the security implications of having, you know -- it's great research, but just making it easy for adversaries to point out specifically the locations of contractors who are working for government.


BAIER: OK, we're back with the panel. What about the series of reports and what is coming out of it? K.T.?

MCFARLAND: The Washington Post makes a good point. After September 11th we didn’t have a lot of spies or analysts so we hired a lot contractors and it was meant to be a temporary fix. The September 11 Commission said this is big, we’re fine, we have the people we need but we needed a central group at the top to figure it all out. We never got that. What we got instead of cadre of professionals we got another sprawling bureaucracy, which is large, unwieldy, and does not have accountability.

And so it is time to take a second look at that. The problem with what Mr. Clapper said is second opinion is great, even a third opinion, but if you have 200 opinions you don't have any opinions. And it gets lost.

BAIER: Juan?

WILLIAMS: What this is about is the sense members of the Senate have that Clapper really is someone not transparent with them, not forthcoming with them about information. They think that he is someone who is about the CIA. Leon Panetta, the Central Intelligence Agency director, is a big fan of Mr. Clapper.

BAIER: So is Secretary Gates.

WILLIAMS: I'm just saying that a lot of people think the DNI was created, and K.T. may know more about this, to look over these organizations and to give you some organizational strength and power, not to be a party to any of this.

MCFARLAND: But he’s going into the Defense Intelligence Agency which is historically a competitor to the CIA.

WILLIAMS: What is happening here at the moment is that John Brennan has become the key briefer for the president, and a lot of people including the president feel like the DNI should be the person and he should carry the weight.

BAIER: Charles did you see a bombshell so far in anything that the Washington Post reported?

KRAUTHAMMER: No. But I think the general story that it's a sprawling bureaucracy that exploded since 9/11 is true. It's hampered us.

But I think the real problem is that the DNI, this new superstructure, was invented without the proper authority. It doesn't have the power of the purse. It's just another layer of bureaucracy which makes things even more complicated.

And look at results, not just the process. We had a report on Iranian nukes in 2007, which was absolutely and completely wrong. Here, we are three years later and we haven’t even had a revision. I am worried about the product, about the Christmas Day bomber who was undetected. We have huge holes in the system despite its size, and it's a result of the fact that we increase the side of everything without logically organizing or giving authority at the top.