Billionaire Investor Carl Icahn on Global Sell-off, Credit Crunch

This is a rush transcript from "Your World With Neil Cavuto," October 24, 2008. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: Now, just in case you think it is safe to look up, billionaire Carl Icahn here to say, you might want to keep hunkering down.

Carl joins me exclusively on the phone.

Now, Carl, you argue we are not quite done yet. Explain.

CARL ICAHN, CHAIRMAN, AMERICAN REAL ESTATE PARTNERS, L.P.: Yes, Neil, I — I'm — I don't really predict market movements day to day and month to month.

Video: Watch Neil's interview with Carl Icahn

I just think that, of course, the economy has some major problems ahead. You still have a lot of derivatives hanging out there. Being that said, I do think there are some great bargains out there to buy. So, you know, it is a mixed bag, as far as I am concerned.

CAVUTO: Now, you are also concerned, Carl, that this is wider and broader than we had known.

In other words, the problems, even though we have addressed them in these arcane instruments, the credit swaps and some of these other things, you argue that we have not even touched some areas that could boomerang. Could you explain that?


I think that — I don't want to, you know, be frightening here, but I do think that you have — you still 60 trillion of these derivatives out there, these CDS's. And I think they're in control. I think they have been marking them down as we have gone along. But I do think that you have to be somewhat wary. You have to worry about the capital still frozen in banks. I think more has to be done.

You know, I am certainly a laissez-faire guy, but I do think, at certainly times, the government must step in. And they are doing the right thing, but probably not enough at this point.


CAVUTO: So, the money that they have spent — I mean, they say globally, we are talking about $3 trillion that central banks and governments have spent to shore up the financial system. That is still not enough?

ICAHN: Well, I don't know that they have spent $3 trillion, plus the fact that I really don't know — there are ways they can do this where they don't really lose, where the government doesn't lose.

CAVUTO: Right.

ICAHN: They can go in and buy some of these assets. It is complicated as hell, though. You have to really get involved with these very, very complex derivatives that were set up, and then go in and buy mortgages out of these CMOs.

CAVUTO: Right.

ICAHN: And I am not going to get into the details about this. You don't have time on the program.


CAVUTO: Right. But, for lot of people who don't know you — and not everyone outside the financial community does — but you are a very gifted investor. You see value and hunt out value in either poorly run, poorly managed companies. You either take direct control or an investment that leads to a change of control.

And you have enriched yourself. You enrich a lot of shareholders in the process, but you argued a long time ago that inherent in the financial system's difficulties were just bad management. And you have been pushing for shareholders to change that. And maybe these times have forced that issue? What do you think?

ICAHN: Yes, I am hoping that is true, Neil. I really think that we - - the basic problem that we have is poor management in this country.

You don't have accountability, so you get stuck with some of these guys. And there's some good managements. But worse than managements almost are these boards. You have do-nothing boards, boards that are there. There are all cronyism. Now, there are some boards that are good.

And they are not bad people on the boards, per se. But there is no way to remove them. And we — you know, even if we sort of solve this problem with a Band-Aid now, we, as shareholders — and I have been saying for years, and proselytizing — actually, I could go into a company, and I am not even a manager, and there is so much waste at these companies that I get into, that you can save 30 percent without even trying, and so — in costs.

And if you don't clean up these companies and get better managements and get better boards, what you're going to have is no way to compete in the future. And, frankly, the whole — one of the reasons that you have this problem today is, boards should have held these guys on Wall Street accountable. You didn't have to be a genius.

And even people in the — that were knew that you were — that these derivatives had gotten out of hand. They were crazy. They were just crazy.

CAVUTO: But you know what we're doing Carl, with the financial measures we have taken — and I wish we had more time, but we don't — but we could be compounding the mess, right, because we are essentially rewarding or backing the very managements that screwed up, right?

ICAHN: Absolutely right.

And what we should be doing here is holding these guys accountable. And, especially, if you want private money to come into these banks, you should hold these guys accountable. You should go in and be able to have true votes.

Now, I have set something up, Neil, the United Shareholders of America.

CAVUTO: Right.

ICAHN: And, you know, I have a blog, "Icahn Report."

And I — what you need — I don't want people giving me any money. I would just like them to join, because to just change some laws — you could just go in change some laws in the federal government, where you could make for true elections. You could make — get rid of all of these shark repellents that these guys have.

They pay — they have the Business Roundtable, which is a huge lobbying organization in Washington. And what we need — and that money — I don't need money. What I need are the voices of shareholders to come join me. Join my United Shareholders of America. Come to the blog and learn how to do it. Just, it is very simple.

CAVUTO: All right.

ICAHN: You come to the "Icahn Report."

And we have to — you're 100 percent right. We have to go in there and change the rules. Now, if you want private money in these banks — we are giving them the money, but you're keeping the same guys, the same guys that got you there.

CAVUTO: OK. No, you're right. You're right.

ICAHN: Hey, in the Titanic, the owner walked off in a lifeboat and then got — got away, you know?


ICAHN: And that is what they're doing here.

So, these same guys are getting their huge severances. It is unconscionable.

CAVUTO: All right.

ICAHN: And — but worse than that, worse than that, you are going to be in the same mess. And you're not going to attract foreign — you're not going to attract either foreign money or private money to take these banks over and clean them up, because you're going to have the same clowns running it, and you are going to end up with the same mess on your hands on your hands one way or another.

And it's — that, to me, is crazy, Neil. We should be changing the rules of accountability when we do this.

CAVUTO: All right.

ICAHN: Now, there are some good guys...

CAVUTO: All right.

ICAHN: ... who just got caught in the — in the headlights.

CAVUTO: You're right.

ICAHN: But...


CAVUTO: It's not a bad idea. I will tell you, Carl, it is not a bad idea. We have been talking about this, and you have been on this. And it's a very good idea. I do want to pursue again in a future chat with you.

Carl, thank you for taking the time.


CAVUTO: I know you have had a crazy day.

ICAHN: Hey, thanks, Neil.

CAVUTO: Same here.

ICAHN: OK. So long now.

CAVUTO: Carl Icahn, probably one of the best investors this planet has ever known. All right.


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