Combining higher pay with putting various legal limitations on people who move between the two sides to combat the conflict of interest would certainly help.

Judges typically get paid less than many of the lawyers who argue in front of them, but there's still plenty of lawyers who want to take a paycut to be judges, and not much action in the other direction. Why? Because judges have really high status.

I was thinking that if the regulators are paid more, get a little more power (not sure if they already have enough power) and start to bust some bankers, get some publicity, then that might eventually lead to more status.

Excellent idea, but you run into the "ticket scalping is Bad" mentality.