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Borrowers who want to lower the interest rate on their federal student loans have a new option, the Wall Street Journal reported today. Citizens Financial Group announced yesterday that it is accepting applications from both parent and student holders of federal loans to refinance into private loans at the Providence, R.I.-based bank. Some borrowers who have good credit scores could get a lower interest rate than what they’re currently paying. Citizens’ fixed interest rates start as low as 4.74 percent, while variable-rate loans, whose rates can change each month, have rates as low as 2.31 percent. The lowest rates are given to borrowers with very high credit scores and long-term employment and who also have a Citizens checking account and set up automatic bill payments for their loan. In contrast, parents who signed up for a federal Plus loan to help their kids pay for college would have received a fixed interest rate between 6.41 percent and 8.5 percent since the 2006-07 academic year. Before then, Plus loans carried variable rates. Undergraduate student borrowers of unsubsidized Stafford loans—the most commonly used federal loans—pay fixed rates ranging from 3.86 - 6.8 percent.

The California Public Employees’ Retirement System, the nation’s largest pension fund, will eliminate all of its hedge fund investments over the next year on concerns that the investments are too complicated and expensive, the New York Times reported today. The pension fund, which oversees $300 billion, said yesterday that it would liquidate its positions in 24 hedge funds and six hedge fund-of-funds — investments that total $4 billion and more than 1 percent of its total investments under management. The decision, after months of deliberation by the pension fund’s investment committee, comes as public pensions across the U.S. are beginning to assess their exposure to hedge funds.

Ally Financial Inc. came one step closer to exiting the U.S. government's crisis-era bailout plan after the Treasury Department on Friday said that it had further pared its stake in the auto lender, the Wall Street Journal reported on Saturday. Treasury, which has kicked off the second stage of its plan to publicly sell shares of Ally, now holds 66.2 million shares of the company's common stock. That translates into a stake of roughly 13.8 percent, down from the 16 percent Treasury held in August. Treasury last month had said that it planned to sell its remaining shares of the auto lender in the open market, although it didn't detail exactly how many it would sell at the time. Friday, it said that it had sold 8.9 million shares, recovering about $218.7 million for taxpayers. It again didn't detail how many shares it would sell in the latest stage of the trading plan. The U.S. Treasury Department, which rescued Ally with a $17.2 billion bailout during the financial crisis, has been steadily reducing its ownership of the former General Motors Co. financing arm, with the aim of exiting the investment altogether.

U.S. regulators trying to force banks to maintain enough capital to survive a severe economic shock have signaled a shift in the tools they’re using to achieve that goal, Bloomberg News reported today. For months, banks have expected the overriding mandate from regulators to be a so-called leverage ratio — a minimum percentage of capital calculated against all assets. Now, under a change outlined by Federal Reserve Governor Daniel Tarullo, the dominant yardstick for big banks may be the capital buffer they would need based on the riskiness of their assets. To meet the tougher rules, banks might choose to stop growing some of their businesses or even sell them off — with Tarullo suggesting the big firms may want to shrink their “systemic footprint.” “The higher they are pulling the range for risk-based capital, the more likely that will be the governing constraint,” said Wayne Abernathy, executive vice president of the American Bankers Association. Tarullo told lawmakers Sept. 9 that the buffer will be higher for big banks than what was agreed to by the 27-nation Basel Committee on Banking Supervision.

It has been six years since Lehman Brothers Holdings Inc. collapsed, plunging the global economy into chaos, but the work of unwinding the largest bankruptcy in U.S. history still isn't finished, the Wall Street Journal reported today. The professionals unraveling the failed investment bank now expect to recover about $88.8 billion for creditors, who are owed an estimated $341 billion. So far, Lehman's parent company and its units have paid out $57.1 billion to unsecured creditors, excluding Lehman affiliates. While its New York-based holding company officially exited bankruptcy in 2012, Lehman's liquidation process is expected to continue for several more years.

The top Democrat on the House Financial Services Committee is proposing an overhaul of credit reporting rules that would help consumers ensure their scores are accurate, The Hill reported today. Rep. Maxine Waters (D-Calif.) introduced legislation yesterday that provides more leeway to consumers to avoid and fix problems on their credit reports created by any wrong or outdated information. Three major credit bureaus — Experian, Transunion and Equifax — use consumers' information to create a credit score that ranges from 300 to 850. The score measures the ability of consumers to manage their debts. Waters's proposal would change the length of time that negative information is left on a report, from seven years to four years. The measure also would remove any adverse information on a credit report on a fully paid or settled debt, including a medical debt, which is in line with the latest credit scoring models developed by FICO and Vantage Score. Read more: http://thehill.com/policy/finance/217284-waters-proposes-bill-to-overha…

Click here to read the discussion draft of the legislation: http://democrats.financialservices.house.gov/FinancialSvcsDemMedia/file…

Two senators indicated yesterday that there is broad interest in seeing the government punish individual bank executives, and not just their institutions, for criminal wrongdoing, The Hill reported today. Sens. Elizabeth Warren (D-Mass.) and Richard Shelby (R-Ala.) both expressed concern that actions tied to the financial collapse have resulted in fines and settlements but not arrests, suggesting the Senate Banking Committee will be an aggressive force no matter which party controls it after November. During a hearing with financial regulators, both said that, while the Justice Department has extracted tens of billions of dollars from big banks for misbehavior leading up to the meltdown, they dropped the ball by not pursuing criminal cases against the executives running those banks. “No corporation can break the law unless the individual within that corporation broke the law,” said Warren. “Not a single senior executive at these banks have been criminally prosecuted.”

Giants Stadium LLC, an entity created by the New York football team to finance a new stadium during the financial crisis, sued Lehman Brothers Holdings Inc. seeking payment of a $301.8 million bankruptcy claim, Bloomberg News reported yesterday. The defunct lender and one of its affiliates breached a 2007 swap agreement tied to the stadium’s financing when Lehman failed to pay the owed amount on Oct. 2, 2008, about two weeks after the bank collapsed, Giants Stadium said in a filing yesterday in bankruptcy court. The claim was made in response to a lawsuit filed by Lehman against Giants Stadium in October seeking about $100 million for early termination of interest-rate swap transactions when the investment bank filed for bankruptcy. Each side says that the other defaulted on the deals, according to court papers.

Legislators will discuss medical debt in relation to credit scores during a House Financial Services Subcommittee on Financial Institutions and Consumer Credit hearing today titled "An Overview of the Credit Reporting System.” Tentative witnesses include Howard Beales from the Federal Trade Commission, Stuart Pratt from the Consumer Data Information Association, Chi Chu Wu from the National Consumer Law Center and a representative of the Consumer Financial Protection Bureau. For more information on the hearing, please click here: http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=39…

Wall Street banks scrambled yesterday to determine how they might have to adjust their business models to comply with newly proposed rules that could push the banks to downsize, the New York Times reported today. In testimony before the Senate Banking Committee yesterday, a Federal Reserve official, Daniel K. Tarullo, said that the central bank was hoping to tip the regulations against banks that are still thought to be too big to fail, and in favor of smaller, less-complex banks. While Tarullo gave few specifics on how the rules would be carried out, his comments suggested that financial firms that rely the most on Wall Street trading, like Goldman Sachs and Morgan Stanley, would probably face the stiffest requirements. The rules could increase the pressure on the big banks to reduce, or even sell, some traditionally profitable operations, like lending to hedge funds and other investors.