Jefferson City News

Congressman Blaine Luetkemeyer has raised concerns about the lack of preparation by banking regulators for potential banking crises caused by artificial intelligence (AI). During a recent congressional hearing, Luetkemeyer questioned Treasury Secretary Janet Yellen about the oversight of banking models in the face of AI-related risks.

Luetkemeyer highlighted the speed at which crises can unfold in the digital age, using the example of $42 billion being withdrawn from a bank within 10 hours due to a tweet and subsequent social media frenzy. He expressed concern that AI could potentially have a similar impact and emphasized the need for proactive measures to address this issue. Luetkemeyer stated, "I'm concerned about that and have got some bills to address that."

In response to Luetkemeyer's question about the role of the Financial Stability Oversight Council (FSOC) in resolving banking crises, Secretary Yellen clarified that the responsibility for supervising and regulating banks lies with the banking agencies. However, Luetkemeyer pressed further, highlighting Secretary Yellen's oversight role as the chairman and her ability to influence the business models of national banks. He asked if she was taking steps to regulate these banks differently and force them to change their operations.

Secretary Yellen acknowledged that the Office of the Comptroller of the Currency (OCC) is an independent agency within the Treasury and that FSOC plays a role in understanding and discussing the extent to which regulatory attitudes can be shaped. However, Luetkemeyer emphasized the significant control FSOC holds in determining how things are done and the regulatory approach to various situations.

The FSOC, established to enhance collaboration among financial regulatory agencies, aims to identify and assess emerging threats to the stability of the U.S. financial system. By bringing together the expertise of federal and state financial regulators, the council seeks to address potential risks and safeguard the stability of the financial system.

Congressman Luetkemeyer's questioning of Secretary Yellen highlights the growing concern about the potential risks posed by AI in the banking sector. As technology continues to advance, it is crucial for regulators to adapt and ensure that appropriate measures are in place to mitigate these risks. The exchange between Luetkemeyer and Secretary Yellen underscores the need for continued oversight and proactive efforts to address the challenges posed by AI in the banking industry.