On February 18, Fed Vice Chair for Supervision, Michael S. Barr, delivered prepared remarks at the a conference, discussing the rapid advancements in AI and its potential impact on the economy and financial stability. Barr focused on generative AI (gen-AI), highlighting its potential to enhance productivity across different sectors and its rapid consumer adoption compared to previous technologies like personal computers and the internet. He outlined two hypothetical scenarios for gen-AI’s evolution: (i) where gen-AI leads to incremental productivity gains by augmenting existing processes; and (ii) where gen-AI brings transformative changes, fundamentally reshaping industries and creating new ones. Barr emphasized, “Scenarios are not predictions of the future, but provide a framework for analyzing the factors that could lead to different outcomes.” He stressed the importance of understanding these scenarios to balance AI’s benefits and risks, stating, “We should make sure that we think about [gen-AI] as enhancing, not replacing, humans.” Barr called for financial institutions and regulators to invest in understanding and responsibly integrating gen-AI, while ensuring AI systems are not misused. He urged collaboration between governments, private industry, and research institutions to establish safeguards and governance frameworks, warning of the risk that gen-AI could “concentrate economic and political power in the hands of the very few and could lead to the gains being realized only by a small group, while the rest are left behind.”
