...Falling oil prices will place a huge stress on the world's junk bond market as energy companies now account for 15 percent of the outstanding issuance in the non-investment grade bond market. The plunge in the prices of crude could trigger a "volatility shock large enough to trigger the next wave of defaults," according to Deutsche Bank.
This explains why the Obama administration - with complicity of both congressional Democrats and Republicans - managed in the wee hours of the morning to slip a loophole into the supposedly "must-pass" cliff-hanger omnibus budget bill. This toxic Trojan horse, passed in December 2014, now includes a minor footnote provision that might cause taxpayers to pick up the tab on more than a trillion dollars (yes, trillion) if the energy market bubble implodes, which it must if oil stays at half the price it fetched just six months ago.
After last minute, heavy lobbying on the budget bill by Jamie Dimon of JPMorgan Chase and an army of 3,000 Wall Street lobbyists, it appears that once again sufficient insecurity and fear had been spread among the political class regarding destabilization of the financial markets (or withdrawal of campaign financing). They allowed a last minute amendment that killed Dodd-Frank protections, and allowed US taxpayers to be shaken down to cover Wall Street's shale gambling debacle.
...Wall Street is now flooded with fracking industry derivatives contracts that protect the profits of oil producers from dramatic swings in the marketplace. Derivatives are essentially insurance policies taken out by the oil industry to guard against fluctuations in the cost of fossil fuel supplies. Dramatic swings rarely happen, but when they do they can be absolutely crippling.
Derivatives taken out to ensure prices don't go down are now creating billions in losses for those who sold such bets on the market; someone is going to have to absorb massive losses created by the sudden drop in oil on the other end of those insurance contracts. In many cases, it is the big Wall Street banks, and if the price of oil does not rebound substantially they could be facing colossal losses....
http://www.truth-out.org/news/item/28406-russia-blamed-us-taxpayers-on-the-hook-as-fracking-boom-collapses
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