Federal Reserve Vice Chair for Supervision Michael Barr speaks on bank regulation — 1/19/2024

Introduction

• Last panel of the day at a conference by the National Fair Housing Alliance
• Panel consists of heads of important regulatory agencies
• Focuses on the topic of artificial intelligence (AI) and its implications

Governor Michael Bar's Perspective on AI

• AI has promises and risks
• The Federal Reserve wants to encourage innovation with clear guidelines
• Rapid adoption of AI, particularly generative AI and large language models
• AI could improve productivity and daily lives, but also lead to economic dislocation and discrimination
• Data quality and rules of the road are important considerations

Acting Controller Michael Sue's Perspective on AI

• Recognizes a spectrum of AI, from machine learning to generative AI
• Emphasizes the need for controls and accountability, particularly in the use of generative AI
• Raises concerns about accountability with generative AI and its impact on consumers

Chairman Martin Gruenberg's Perspective on AI

• Acknowledges the importance of the conference and the role of the National Fair Housing Alliance in addressing equity and fairness
• Highlights the potential of AI to expand access to banking and credit, but also acknowledges the complexity and challenges of implementing the technology safely
• Discusses the need to consider consumer protection and safety and soundness in supervising institutions using AI
• Stresses the importance of building in protections from the outset, rather than repairing damage after the fact

Director Chopra's Perspective on AI

• Reflects on the previous ten years and the techno-utopianism surrounding AI
• Highlights the need for existing laws, regulations, and enforcement to address AI discrimination and uphold consumer protection
• Discusses the use of AI tools in investigations and supervision at the Consumer Financial Protection Bureau (CFPB)
• Emphasizes the importance of a balanced approach, considering outcomes and results, and the utilization of laws and regulations

Agencies' Use of AI Tools

• Agencies are developing their own internal capabilities and expertise in AI
• Focus on building technical skills within agencies
• Collaboration and information-sharing among agencies on AI issues and supervision
• Consideration of outcomes and results in the use of AI tools

Implementing White House AI Initiatives

• Alignment with the AI Bill of Rights and the executive order on AI
• Agencies are engaging with the principles and ideas outlined in these initiatives
• Focus on safety, security, consumer protection, privacy, equity, innovation, and competition
• No indication of modifications to model risk management guidance

Conclusion

• Panelists appreciate the opportunity to discuss AI and fair housing issues
• Acknowledgment of the role of the National Fair Housing Alliance
• Gratitude for the commitment to fair housing and lending