Carl Icahn told Larry Fink that Blackrock is 'dangerous' to his face

Billionaire activist investor Carl Icahn and Larry Fink, the CEO of multi-trillion dollar asset management firm BlackRock, were on a panel together at the CNBC/Institutional Investor Conference at the Pierre Hotel in New York.

The panel, which focused on activist investing, started out cordially with both investors complimenting each other and saying that they respect each other (Icahn is notorious for that).

Then it got heated (Icahn is also notorious for that).

"I think BlackRock is an extremely dangerous company...Not that Larry is dangerous...What BlackRock is doing.... What is happening is very dangerous in our markets today," Icahn said.

What is happening is the rise of structured securities that BlackRock creates, like ETFs.

Icahn said that he feels strongly that ETFs are "overpriced" and "extremely illiquid." He thinks that they are going to "blow up."

The "respect" between these two men started when Fink wrote an open letter to Wall Street criticizing activist investing. Icahn, who has been pushing for change at the companies he invests in since the 1980s, is Wall Street's most prominent activist. That's what the two men were on stage to talk about.

But instead of going on the defensive about himself, Icahn was on the offensive against Fink and BlackRock.

"I'm not blaming Larry personally. I'm blaming BlackRock. I don't blame him in the sense that he's doing something nefarious," Icahn said.

He thinks that situation is "extremely dangerous to this country."

"BlackRock sells the idea of liquidity," Icahn before taking another swipe, "It's a dumb machine. The state could do it like the g-ddamn highway."

Fink said the actual ETF process enhances liquidity.

He later added that Icahn's characterization of ETFs is "flat out wrong."

The moderator, CNBC's Scott "The Judge" Wapner, called Icahn out a few times for not being fair too.

None of that phased him. Icahn said that he told his daughter that the market is like a party bus being driven by Larry Fink and Federal Reserve Chair Janet Yellen. That bus, he said, would spin out of control "and hit a black rock."

The crowd was howling.