It's Turtles All The Way Down

“I was sort of raised to have a not too positive opinion of Wall Street,” Patrick Byrne, the president and CEO of Overstock.com, Inc.

, told Benzinga during a

. “I grew up in financial circles and I grew up hearing that it was dirty,” he said. “It was nothing like this 20 years ago.” Byrne was taught to revere the SEC because, as he puts it, “Regulating a capital market is a sacred mission.” But in the last 20 years, he hasn't been too happy with neither Wall Street nor the SEC. “Wall Street is or became much dirtier than it was 20 years ago when I worked there,” Byrne said. “I think the behavior that is run-of-the-mill now would have stood out like a sore thumb a generation ago. The standards have fallen so far.” Though he said he hates to insult the SEC and its members (or any other public servants), Byrne firmly believes that the Securities and Exchange Commission has been asleep at the switch for the last decade. “I think that primarily comes from the brass,” he said. “My sense, my understanding, is that people in the middle-tiers of the SEC and on the frontlines actually supported us in many cases. But the brass, especially the brass in the last decade, got terribly co-opted. And by the brass I mean the top 200 or 300 people in Washington, DC [who were looking for their] million-dollar jobs and exits from the SEC. They really stopped doing their job.” However, Byrne sees hope in the SEC's newest leader, Mary Schapiro. “I think she's got some guts,” he said. “I think she's provided some leadership and that she's changing the mentality of that brass, and a lot of the members of it as well.” Byrne added that he does not think this clean-up is temporary, nor does that this is a small deal. “I think that this is the beginning of an enormous network being rolled up,” he added. “I think that this is the tip of the iceberg. CNBC is already saying, ‘Did the FBI go too far today?' They don't get the joke yet. “I think that they're just scratching the surface. I think this goes on and on in the hedge fund community. This is a community whose business model is, at least a really substantial part of it, breaking the law. There are a couple of dozen hedge funds – you know, I really think there are a half-dozen that form the core of it all – and then there's a couple dozen of very prominent hedge funds whose whole business model is breaking the law.” Byrne said that when it comes to his opinion of Wall Street, he's reminded of Bertrand Russell, a famous British philosopher who once debated with a Hindu cosmology professor. “And the professor was saying, ‘Well, the universe rides on the back of a turtle,” Byrne said. “And Russell said, ‘Well, what's the turtle ride on?' “And the professor said, ‘Well, in our cosmology he rides on the back of another turtle.' And Russell said, ‘Well, what's

turtle ride on?' “And the Hindu said, ‘Well, sorry, it's turtles all the way down.' “Well, we took our suspicions about what was going on to the establishment, to the bankers' compliance officers and tried to show them data to show their banks were letting stuff go on that shouldn't go on. And we got laughed out of court. We went to NASDAQ and we got laughed out of court.” Byrne said he then went to the SEC, “and as predicted, they responded by opening up investigations on me.” “Then we went to the Senate Banking Committee,” he continued. “Then we finally went to the New York financial press and became the target of a tremendous smear campaign. So I gradually learned that our east-coast financial establishment is just turtles all the way down. It's corrupt all the way to the toes.” To hear more from the Overstock.com CEO – including his thoughts on Warren Buffett and Michael Milken – don't miss Benzinga's

with Patrick Byrne.