From Principles to Policy: Enabling 21st Century AI Innovation in Financial Services
Committee on Banking and Currency
2025-12-10
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Source: Congress.gov
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Joshua Branch
Committee on Financial Services will come to order. Without objection, the chair is authorized to declare a recess at any time. Today's hearing is entitled, From Principles to Policy, Enabling 21st Century AI Innovation in Financial Services. Without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. I now recognize myself for four minutes for an opening statement. Advancements in artificial intelligence are not just on the horizon, they're here and they're transforming our economy. Last Congress, Congressman Bill Foster now served on Speaker Johnson and Minority Leader Jeffrey's bipartisan Congressional AI Task Force, and Congressman Steve Lynch and I led this committee's AI Working Group. In both forums, we examined how financial services firms and regulators are approaching artificial intelligence, analyzing its benefits and risks in a highly regulated environment. Just this past fall, the Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee, led by Chairman Brian Stile, held a hearing where members evaluated how financial regulators and firms are using AI. Today's hearing builds on our earlier work in last Congress and this Congress and will help us further examine AI use cases in the financial and housing industries. We will also consider how agencies are providing clear regulatory environment and assess where existing laws may fall short or require modernization and explore ways to foster innovation. For decades, the financial services industry has pioneered the real-world application of AI and continues to be a standout leader. AI has shown its transformative potential to reshape how financial institutions operate, from enhancing analysis to managing risk, mitigating fraud, and importantly, enhancing customer service.
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Joshua Branch
However, as with any innovation, risks give rise to new challenges. Yet human progress is ever-changing, never static, and AI represents the latest leg in this journey. To move forward, we must embrace and adapt for innovation. This was the approach taken in the 1990s by former Congressman and former SEC Chairman Chris Cox. when Congress confronted the rapid commercialization of the internet. Rather than allowing fear to stall advancement, lawmakers adopted existing laws to fit the new technological era. Congress established clear guidelines and principles early on, setting the stage for the rapid growth of the Internet, enabling countless innovations and entire industries, and putting the United States at the forefront of that innovation and the Internet's expansion. Just as Congress navigated the uncertainties of the internet in the mid-1990s, we must use AI as an opportunity, not a threat, applying lessons of that era in order to confront today's technological landscape. Identifying gaps and obstacles in our regulatory frameworks will help Congress create an AI landscape where innovation can flourish without unnecessary barriers while ensuring robust consumer protections and risk-based technology-neutral regulations. The committee is steadfast in its commitment to empowering U.S. firms to leverage AI's potential and drive the U.S. global leadership in adoption and innovation. I thank all of our witnesses for joining us today and providing your valuable insights and perspectives, and I yield back. It's now my pleasure to recognize the ranking member of the committee, Mrs. Waters, for four minutes for an opening statement.
Thank you very much, Mr. Chairman. AI is already embedding in the lives of millions of Americans, and we have a duty to ensure that it benefits society, not harms it. Unfortunately, Republicans have been complicit as Donald Trump bypasses Congress, directs federal agencies to deploy biased AI. with no safeguards and now issuing an executive order that seeks to undermine all state oversight. Republicans in Congress failed to acknowledge that despite all the benefits that AI may bring, it also poses challenges that demand our full attention. We're already seeing AI systems that hurt Children spread hate and discrimination and amplify systemic risk in the financial system as unemployment reaches new heights. Reports continue to show AI replacing workers across industries. That's why the Biden administration put in critical protections to ensure AI systems are transparent, explainable, and non-discriminatory. These are just basic safeguards to keep families and children safe. In some of the worst cases, chat boxes have encouraged self-harm, like suicide, carried out sexually explicit conversations, and even provided dangerous misinformation and disinformation to minors. But no one should be surprised that the same president who calls affordability a hoax is ignoring these very real concerns with AI. Since twice this year, the White House and congressional Republicans have tried and failed to impose a moratorium on state AI laws. And now, despite those failures, Trump announced he would sign an executive order that would block states from adopting their own AI safeguards by threatening legal challenges and withholding federal funding.
And for this hearing, Republicans posed a bill posted a bill that would give AI and its big tech creators a pass when they violate consumer, housing, banking, or securities laws. Democrats are not going to sit by and watch Trump and Republicans allow big tech to forcibly experiment on our communities. Any legislative efforts by Congress must ensure that consumers and investors understand the AI I, they are interacting with in the financial services space while giving companies meaningful standards they can innovate under. A partisan approach is not necessary if Republicans fight for their constituencies.
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Joshua Branch
Last Congress, I and then Chair McHenry launched the first ever bipartisan AI task force. We held joint sessions, conducted oversight, and introduced bills to confront AI bias, deep fake scams, and discrimination, proving that innovation and oversight can go hand in hand. Democrats are leading these efforts because we believe in responsible innovation. The stakes are too high, the risks are too great, and the consequences too real to hand this technology over to big tech billionaires with no guardrails, no accountability.
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