Most Powerful CEOs

CNBCOn Wednesday, legendary activist investor Carl Icahn and BlackRock CEO Larry Fink were supposed to debate activist investing in a live broadcast from the CNBC Delivering Alpha Conference.

But the conversation didn't quite go as planned.

Icahn is perhaps the most widely known activist investor.

Fink's firm manages $4.7 trillion in assets and invests passively in index funds and exchange-traded funds (ETFs).

The panel, called "The Alpha Debate: Activism, " began with Fink's addressing some of the open letters he has written company CEOs who have been critical of activists. Fink said there were some "good" and some "bad" activists.

When it was Icahn's turn to speak, he turned the tables on Fink.

"I don't think I'll be a 'good activist' at the end of what we say, " Icahn said, after first saying that he respected Fink.

Icahn blasted Fink's open letters as being a "sales pitch for BlackRock."

"Going in that letter, and I have them, but I'm not going to start reading them, but basically, they're telling these companies hey, look, we'll protect you if you go out and issue debt, because this is the long-term plan, has to be that you could acquire, issue debt, go — which is great for BlackRock, because the more debt out there, the people buy it, the more investment bankers love it, and BlackRock makes more money."

Icahn continued to dig in, and he slammed BlackRock as being an "extremely dangerous company."

The rest of the panel looked uncomfortable for Fink. It was like witnessing a car wreck you couldn't turn away from. (We've reached out to BlackRock about how he feels about it. We'll update when we hear back.)

We've included a transcript from CNBC of the exchange and screenshots highlighting the investors' body language below.

ICAHN: I would say this; that I think BlackRock is an extremely dangerous company, OK? [AUDIENCE LAUGHTER]

CNBC/ Business Insider illustration

ICAHN: I mean not that Larry is dangerous. He's a good guy. What BlackRock is doing, and I really mean this — and I'll say what I mean. I'm too old to not say what I mean ...

CNBC/ Business Insider illustration

ICAHN: ... that what's happening is very dangerous in our markets today.

ICAHN: As Larry said, high yields are now .5 trillion. 0 billion of that is in ETF, what have you.

CNBC

ICAHN: More importantly, they are overpriced, because if you go down and look at the index — and now I could get into some arcane stuff, but what a lot of these guys do, including BlackRock and the others, is these things — high-yield bonds, as you know, if you trade them, are quite illiquid. And therefore, if somebody wants to buy them, they do what they call CDS. They sell insurance on them. So take the money they are given, buy five-year Treasurys, then they go and they buy insurance from a guy like me. As a result, I personally think the illiquidity increases. So these high yields are extremely illiquid and extremely overpriced.

SCOTT WAPNER: You're not really blaming Larry for concerns that you have —

ICAHN: Not blaming Larry personally, no. I am blaming BlackRock. I absolutely —

WAPNER: Let's let Larry respond, please.

ICAHN: I would like to answer — I don't blame him in the sense of doing something nefarious. I blame the whole situation — I have don't blame Larry for making money. That's his job. BlackRock should make money. That's what they do. I think the letter is a brilliant obfuscation; but what I am saying, the situation is extremely dangerous in this country. And what is going on because of BlackRock — let me finish it, because I really want to say what I'm saying. I'm not saying they are bad people. BlackRock sells the concept of liquidity. You pay more — when you go in, go into an ETF with BlackRock, you are paying more basis points than you are at Vanguard.

And it adds up to, just on the passive stuff — a dumb machine that tells you at the end of the day, here's a lot of money. Go buy the index. A dumb machine. The State could do it, like the goddamn highway, and they could use the money to help the homeless people, you know.