Wall Street’s embrace of artificial intelligence poses acute risks to the US financial system and demands more congressional scrutiny, according to a key Democratic lawmaker.
Maxine Waters, the top Democrat on the House Financial Services Committee, warned that financial firms’ use of the technology could lead to more discrimination in lending. She also called on the panel’s chairman, Republican Patrick McHenry, to urgently hold a hearing on generative AI, which creates content such as images and text based off a user’s prompt. Waters said those tools may lead to data leaks and the spread of misinformation.
“The committee must move quickly to consider the potentially disruptive effects of these powerful AI models,” Waters said in a letter to McHenry, which was made public on Thursday. “These technologies may embed historic inequities in the financial services and housing markets through the use of data that reflect underlying bias or discrimination.”
Wall Street banks are using and testing AI in their businesses, as well as racing to hire more people in the area, Bloomberg News has reported. There are also concerns about the rapid pace that tools are automating critical decision-making processes for lenders such as screening for potential defaulters.
Waters said that a task force she assembled several years ago on the issue identified ethical and legal concerns such as algorithmic bias and discrimination. In her June 14 letter, the California lawmaker said the speed at which AI is being developed can “potentially outpace” lawmakers and regulators in understanding potential harms and how quickly protections can be put in place.
Washington’s approach to AI thus far has been scattershot. Various regulators and lawmakers have weighed in, but the US government hasn’t adopted a comprehensive framework.
Rohit Chopra, who leads the Consumer Financial Protection Bureau, said on Tuesday that Congress may need to get involved and warned that use of AI by financial firms could have pernicious impacts on the housing market.