Luetkemeyer Questions Sec. Yellen on AI Risk, Oversight
Washington, February 6, 2024
Tags: Financial Services
Today, Congressman Blaine Luetkemeyer questioned Treasury Secretary Janet Yellen on banking regulators’ lackluster efforts to prepare banking models for artificial intelligence-spurred banking crises.
Rep. Luetkemeyer: “As we saw with Silicon Valley, social media, and the 24-hour news cycle, suddenly within, you know, 10 hours, we had $42 billion run out of the bank as a result of a tweet and social media following that around. AI could do the very same thing, and I'm concerned about that and have got some bills to address that...Along the lines though you talked about FSOC's role in these three banks and how they were able to help resolve the situation.
My question to you is, what has FSOC done to fix the situation with these banks that are upside down with their interest rate? If their business models are off, they should be regulated differently, they should be forced to change how they're operating. Are you doing that?”
Sec. Janet Yellen: “The responsibility for supervision of these banks and regulation rests with the banking agencies.”
Rep. Luetkemeyer: “I agree with that, Madam Secretary. The problem is you, as the chairman, are overseeing the comptroller, also have the ability to go in and change his business models. Are you doing that with the national banks that you oversee?”
Sec. Janet Yellen: “Well, the OCC is an independent agency within Treasury. FSOC is trying to understand and discusses, um, the extent to which-”
Rep. Luetkemeyer: “Madam Secretary, FSOC has got a tremendous amount of control over this. They can dictate how these things are done; how regulatory attitudes are towards situations.”
Background: The Financial Stability Oversight Council (FSOC) is meant to improve collaboration between financial regulatory agencies and address potential risks to the stability of the U.S. financial system. The Council brings together the expertise of federal and state financial regulators to identify and assess emerging threats to U.S. financial stability.