Finance
House Financial Services Committee leaders eye AI regulatory push
Top lawmakers on the House Financial Services Committee are using the stretch run of this congressional term to address the impact artificial intelligence has on the finance and housing sectors.
Reps. Patrick McHenry, R-N.C., and Maxine Waters, D-Calif., the chair and ranking member of the committee, respectively, announced Monday the introduction of a resolution to acknowledge the rising use of AI in financial services and in the housing industry, as well as a bill that calls on financial regulatory agencies to study the benefits of the technology within the sector.
The resolution and bill are the culmination of nearly a year of work from the committee’s bipartisan AI working group and come just days before a hearing that will explore how the technology is framing the future of finance.
“Artificial intelligence holds the promise to revolutionize our financial system,” McHenry said in a statement. “As firms increasingly leverage AI, lawmakers and regulators tasked with oversight of the financial services industry must constantly evaluate the risks and benefits this technology poses. These bills are a small, but critical, step forward to empower the financial system to realize the numerous benefits artificial intelligence can offer for consumers, firms, and regulators.”
The resolution, introduced by McHenry and co-sponsored by Waters, spells out the House Financial Services Committee’s responsibilities when it comes to AI, covering everything from how housing market participants leverage the technology for underwriting and tenant screening to scrutinizing how financial institutions’ use of AI could increase herding behavior in the markets.
The committee, McHenry and Waters write in the resolution, will make sure financial regulatory agencies are carrying out their enforcement powers and have the right tools to do so as AI usage in the sectors proliferates. They’ll also consider reforms to data privacy laws “given the importance of data, especially consumer data, to AI,” collaborate with regulators on AI’s impact on the workforce and do what they can to make sure the United States leads globally on the development and use of AI in the industries.
“Artificial intelligence is growing rapidly, and people across America are already seeing its use in our nation’s housing and financial services sectors, with impacts on mortgage lending, credit scoring, and more,” Waters said in a statement. “Our committee will continue to collaborate closely with the federal government to identify the risks and benefits of AI and to explore further legislation needed to protect people and our communities.”
The Analysis and Improvement Act of 2024 — or the AI Act of 2024 — would require the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau and the National Credit Union Administration to deliver a report to the House Financial Services Committee that examines a variety of AI-related issues in the agencies’ respective sectors.
Those issues include the use of AI in home valuation, loan underwriting and servicing, how banking institutions use AI to identify fraud, money laundering and cybercrime, and how AI is used in debt collection and foreclosures. There are also callouts in the bill for how AI can mitigate bias and discrimination in banking services, how the technology can level the playing field between small and large financial institutions, and how it can benefit cybersecurity risk management.
The bill would also require the Securities and Exchange Commission to produce a report on AI’s risks and benefits to the markets and have the Treasury Department study the technology’s ability to secure the country’s financial system from national security threats.
Another provision of the bill calls on the Department of Housing and Urban Development, the Federal Housing Finance Agency, the Rural Housing Service of the Department of Agriculture and the CFPB to report on the risks and benefits of AI on housing and mortgage regulators.
“I look forward to passing these bills and continuing to work in a bipartisan manner on this important issue next Congress,” Waters said.
TORONTO — Ontario should be prepared for “tougher times” amid global economic disruption, but the government won’t slash public sector jobs to buttress the budget amid uncertainty, the finance minister is signalling ahead of Thursday’s fiscal update.
Other provinces have recently braced against the economic headwinds by forecasting record deficits, raising taxes and cutting front-line jobs, but that will not be Ontario’s approach, Peter Bethlenfalvy says.
“The world has changed — and Ontario must be ready for what change may bring, even if that means being prepared for tougher times,” he said in a pre-budget speech earlier this month.
“As a government, we cannot eliminate uncertainty, but we can mitigate risks with a responsible, balanced fiscal approach that supports public services and infrastructure while maintaining flexibility.”
In that speech, he twice mentioned delivering government programs “efficiently and sustainably,” words that are sometimes used by politicians to signal belt tightening.
“I think it reflects the fact that we’ve got to make sure that the money, the significant investments we’re making in social services, health care, education, gets to the workers who are providing, whether it’s a social worker or a health-care worker or a teacher, and making sure all the money just doesn’t flow to administration,” he said Wednesday in an interview.
Ontario has already tasked hospitals with coming up with a three-year plan to balance their budgets, in a bid to get a handle on growing deficits in the sector, using an assumption of getting two per cent annual funding increases. That is half of the increase they received the previous year.
Some hospitals have already started making some “lower risk” cuts under that plan, the Ontario Hospital Association has said. The province would need to add about $2.7 billion to meet the full operating needs of the hospital sector, the association has said.
The province’s deficit, in the most recent fiscal update earlier this year, stood at $13.4 billion. Bethlenfalvy has been silent on whether the path to balance remains the same as his plan in last year’s budget to get into the black in 2027-28.
Balance, however, has been a moving target. The 2027-28 goal is a year later than Bethlenfalvy projected in the 2024 budget, which itself was a year later than he projected in the 2023 budget.
Ontario’s books are in a relatively good position to be able to stay on the province’s path to balance and lower the net-debt-to-GDP ratio, as long as it doesn’t use fiscal breathing room to announce new spending commitments, according to a budget preview from Desjardins.
UK inflation held at 3% in the year to February, before the start of the conflict in the Middle East, which has sent energy costs soaring and led to concerns of a resurgence in pricing pressures.
The latest consumer price index (CPI) reading from the Office for National Statistics (ONS), released on Wednesday, was in line with consensus expectations. This came after inflation fell to 3% in January from 3.4% in December.
The ONS said that clothing made the largest upward contribution to the monthly change in inflation in February, while motor fuels was the biggest downward contributor.
Read more: Multiple Bank of England interest rate rises expected after energy price surge
The data covered the period before the start of the conflict between the US, Israel and Iran on 28 February. The conflict has disrupted oil (BZ=F, CL=F) and gas (NG=F) supply, sending prices soaring, with concerns that a prolonged energy price shock could push inflation back up.
Grant Fitzner, chief economist at the ONS, said: “The largest upwards driver was the price of clothing, which rose this month but fell a year ago.”
“This was offset by falls in petrol costs, with prices collected before the start of the conflict in the Middle East and subsequent rise in crude oil prices.”
The Bank of England (BoE) warned last week that inflation will be higher in the “near term” due to the shock from higher energy prices, as it announced it had kept interest rates on hold at 3.75%.
Commenting on February’s inflation figures, chancellor Rachel Reeves said: “In an uncertain world we have the right economic plan, taking a responsive and responsible approach to supporting working people in the national interest.”
“We’re taking £150 off energy bills and providing targeted support for those facing higher heating oil costs. We’re also acting to protect people from unfair price rises if they occur, bring down food prices at the till, and cut red tape to boost long-term energy security — building a stronger, more secure economy.”
Ruth Gregory, deputy chief UK economist at Capital Economics, said: “The economy entered the energy price shock caused by the conflict in the Middle East with CPI inflation stuck at 3.0%.”
“And based on our current working assumptions about oil and gas prices, we now think CPI inflation could rise to a peak of about 4.6% in Q4.”
“With the energy price shock likely to extinguish growth and add to the already elevated unemployment rate, in our baseline scenario we still think an extended interest rate pause is more likely than interest rate hikes,” she said.
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