03/28/2010 05:12 am ET Updated May 25, 2011

Stricter Regulations Will Keep Reckless Banks From Killing American Jobs

It's a sad fact of life when today in the United States, a small group of irresponsible investors can wipe out tens of thousands of jobs before the business day is over.

That's what nearly happened to 30,000 Teamsters who work at the country's largest trucking company, YRC Worldwide (YRCW). Because they owned credit default swaps -- what I call a weapon of mass job destruction -- investors had an interest in forcing YRCW into bankruptcy. And bankruptcy would have certainly meant liquidation.

Credit default swaps are basically wagers that a company won't be able to repay its debts. This egregious practice allows investors to make MORE money if a company goes belly up instead of surviving.

It makes no sense to give our financial system special treatment and at the same time to allow them to sell financial products that destroy jobs.

This is what nearly happened at YRCW, which has been in financial trouble. YRCW is the parent company of YRC, which is made up of Yellow and Roadway. Holland, Reddaway and New Penn are also part of YRCW.

To stay afloat, YRCW needed to exchange its bonds for stock. That's when financial service companies created and sold the credit default swaps on YRCW's bonds.

What that meant was the investors who bought the credit default swaps could have made a bigger profit if YRCW went bankrupt. The investors held on to their bonds.

By exposing this shameful behavior, the Teamsters pushed the bondholders to take part in the exchange of bonds for stock. In the end, enough of the investors participated to keep the company alive.

This is why we need stricter regulations of reckless banks. And thankfully President Obama is fighting hard to change the rules that allow banks to act contrary to the interests of their customers.

The Senate is looking at ways to prevent such egregious practices by financial institutions. One thing they could do is to subject derivative products like credit default swaps to comprehensive oversight.

How can we create new jobs in America if we don't get rid of practices that let irresponsible banks destroy them?