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Cramer: SEC Needs Pay Incentives

Here’s an idea: Give the best and brightest reason to forego a lucrative career with a bellwether investment bank for an even bigger salary from the government. Such a move is essential, Cramer said Thursday, if the Securities and Exchange Commission hopes to stem corruption in the markets.

“Instead of having people leave the SEC to work in the world of finance,” the Mad Money host said, “we could have hedge fund managers leave the private sector to make more money at the SEC.”

Right now there’s no incentive for young, hungry bankers to choose public service over Wall Street’s payroll. The compensation is minimal, and these upstarts might soon be working for the very hedge funds and brokerages that they’re supposed to monitor. Why burn bridges?

Cramer endorsed big-money government regulatory positions, but he doubted Congress would shell out the money for them. So it might be better to take a tack used by the old British navy, back when sailing ships ruled the seas, or the IRS: Give anyone who nabs a thief a cut of the spoils.

British navy captains who caught a pirate or enemy ship were given a fraction of its value. And the IRS rewards whistleblowers with a piece of the money reclaimed from tax evaders. The SEC should do the same thing, Cramer said. If an employee discovers market manipulation, then he or she should get 10% to 20% of any money seized by the government.

And that’s the best part. Washington doesn’t have to pay a dime. All the proceeds come from that captured cash. The SEC, and even the Commodity Futures Trading Commission, which is trying to stop oil speculation, could monetize the do-good ethic that draws people to public service and keep crooks like Bernie Madoff from hurting ordinary investors.

“That’s a real incentive for regulation,” Cramer said.

Call Cramer: 1-800-743-CNBC

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