Put Fund Shame Where It Belongs

Hedge funds did this wrong. Hedge funds did that wrong. Hedge funds hurt this guy, hedge funds hurt that guy.

Oh please, give me a break! This stuff is so wrong as to be distasteful.

First, the real crimes that I have seen -- like the stealing of net asset values -- occurred with mutual funds. The real sellouts, the real criminals, were the managers of mutual funds who let hedge funds flit in and out of their own accord because they believed no one from the government would catch on. They were right, of course; no one from the blind-as-a-bat SEC ever figured this scam out. But New York Attorney General Eliot Spitzer did.

Second, the hedge funds that have gone awry duped only the rich. Amerindo took mom and pop's money at the top and ran it right down. So did Janus (JNS - commentary - Cramer's Take). Those aren't hedge funds; those are mutual funds. Hedge fund clients can take care of themselves. The mutual funds rely on the government to police them, and the feds have been pathetic about doing so.

Only the mutual funds have a compensation system designed to reward sharp salesmanship. Again, think about that great article by Joe Nocera in The New York Times Saturday. (He will be my guest on "Mad Money" tonight.) Janus took millions upon millions in with a totally irrational and reckless strategy that would have put any hedge fund out of business, but the 401(k) administrators didn't take the money away, which is outrageous.

I am not a big believer in letting non-qualified (read: not wealthy) individuals into hedge funds because they can take on more risk than most people who aren't wealthy can fathom. But let's stop hounding hedgies; the great disgrace of our time has come from the mutual funds and people like Alberto Vilar, not hedge funds.

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James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS by clicking here. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here. Listen to Cramer's RealMoney Radio show on your computer; just click here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict."