Okay so here, according to Nexis is the full transcript of what he said. It differs a bit from what some readers say they heard, but that might be a transcription problem since — as some of you may have heard — O’Reilly has a tendency to talk over people.

O’REILLY: Continuing now with our lead story, danger from the Muslim world.

Joining us from Washington FOX analysts Mary Katharine Ham and Juan Williams.

So, Juan, I got to tell everybody, own up to this, that talking points memo was really written by Alan Colmes.

So, where am I going wrong there, Juan.

JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: Well, actually, I hate to say this to you because I don’t want to get your ego going. But I think you’re right. I think, look, political correctness can lead to some kind of paralysis where you don’t address reality.

I mean, look, Bill, I’m not a bigot. You know the kind of books I’ve written about the civil rights movement in this country. But when I get on the plane, I got to tell you, if I see people who are in Muslim garb and I think, you know, they are identifying themselves first and foremost as Muslims, I get worried. I get nervous.

Now, I remember also that when the Times Square bomber was at court, I think this was just last week. He said the war with Muslims, America’s war is just beginning, first drop of blood. I don’t think there’s any way to get away from these facts.

But I think there are people who want to somehow remind us all as President Bush did after 9/11, it’s not a war against Islam. President Bush went to a mosque –

O’REILLY: Well, there isn’t any theology involved in this at all from my perspective, Juan. But you live in the liberal precincts. You actually work for NPR, OK?

WILLIAMS: Yes.

O’REILLY: And it’s not about — it’s about politics as I said. But — my analysis is that this Israel thing and that liberals feel that United states is somehow guilty in the world, of exploitation and backing the wrong side, and it makes it easier for them to come up with this kind of crazy stuff that, well, you can’t really say the Muslims attacked us on 9/11.

WILLIAMS: No, but what Barbara Walters said to you –

O’REILLY: Were they Norwegians? I mean, come on.

WILLIAMS: Wait a second though, wait, hold on, because if you said Timothy McVeigh, the Atlanta bomber, these people who are protesting against homosexuality at military funerals, very obnoxious, you don’t say first and foremost, we got a problem with Christians. That’s crazy.

O’REILLY: But it’s not at that level. It doesn’t rise near to that level.

WILLIAMS: Correct. That’s — and when you said in the talking points memo a moment ago that there are good Muslims, I think that’s a point, you know?

O’REILLY: But everybody knows that, Juan. I mean, what are, in 3rd grade here or what?

Williams is clearly simply being honest while at the same time saying that these attitudes are problematic. It seems to me that falls squarely into the “honest liberal” category of discourse. But I’m also not surprised that NPR got rid of Juan (who is a terrifically nice guy in person, btw). This strikes me as one of these classic last-straw things. NPR was probably looking to drop him for years because of the Fox connection and they’re using this as an excuse.  That doesn’t make it any less annoying, but it does make it less shocking, at least to me.