Jefferson City News

In a recent House Financial Services Committee hearing, Congressman Blaine Luetkemeyer expressed his concerns about the potential for bank runs caused by artificial intelligence (AI). Luetkemeyer drew attention to his proposed legislation aimed at equipping banking regulators with the necessary tools to prevent such crises from devastating the broader banking system.

During the hearing, Luetkemeyer, who serves on the China Select Committee, emphasized the potential vulnerability of the banking system to manipulation by AI technology. He stated, "It scares the heck out of me because we've just handed the Chinese the way to mess with our banking system and our economy." Luetkemeyer highlighted the ease with which AI could be used to spread false information, stating, "All you do is short sell tonight, go up tomorrow morning with a tweet, or an artificial intelligence Facebook post of Larry Kudlow, Bloomberg, Dave Ramsey, somebody who is respected in the investment field."

Luetkemeyer further underscored the difficulty in distinguishing between real individuals and AI-generated content, adding, "You can't tell the difference and you have somebody of that reputation go up there and say 'I've got a hundred banks that are in trouble.' And suddenly it's like, 'wow.'" He also acknowledged the potential for real-time payments and instantaneous transfers to exacerbate the impact of a bank run.

To address these concerns, Luetkemeyer proposed granting the regulators, including the Federal Deposit Insurance Corporation (FDIC), the Treasury, and the Federal Reserve, the ability to implement a temporary transaction account guarantee program swiftly. He emphasized the importance of empowering regulators to intervene and prevent the spread of a bank run throughout the entire system. Luetkemeyer stated, "I'm not trying to protect a single bank here. I'm trying to protect the system from going down when you have a run that can be a contagion that could spread to everything."

Professor Simon Johnson, in agreement with Luetkemeyer's concerns, highlighted the potential for AI to generate fake images and messages convincingly. He also noted the likelihood of financial institutions using similar AI engines internally, which could amplify the speed and impact of bank runs.

Luetkemeyer's proposed legislation, the Small Business Stability Act, introduced last year, seeks to empower the FDIC to guarantee deposits in noninterest-bearing transaction accounts for up to 60 days during crises that pose a threat to the overall stability of the banking system. The approval of the FDIC Board of Directors, the Board of Governors of the Federal Reserve System, and the Secretary of the Treasury would be required for this measure to be implemented.

In conclusion, Congressman Blaine Luetkemeyer has sounded the alarm on the potential risks posed by AI-driven bank runs. He has called for the provision of tools to banking regulators to prevent such crises from destabilizing the broader banking system. Luetkemeyer's proposed legislation aims to address these concerns and provide the FDIC with the authority to guarantee deposits in noninterest-bearing transaction accounts for a limited period during times of crisis.