Yellen To Warn of 'Significant Risks' From Use of AI in Finance

U.S. Treasury Secretary Janet Yellen will warn that the use of AI in finance could lower transaction costs, but carries "significant risks," according to excerpts from a speech to be delivered on Thursday. From a report: In the remarks to a Financial Stability Oversight Council and Brookings Institution AI conference, Yellen says AI-related risks have moved towards the top of the regulatory council's agenda.

"Specific vulnerabilities may arise from the complexity and opacity of AI models, inadequate risk management frameworks to account for AI risks and interconnections that emerge as many market participants rely on the same data and models," Yellen says in the excerpts. She also notes that concentration among the vendors that develop AI models and that provide data and cloud services may also introduce risks that could amplify existing third-party service provider risks. "And insufficient or faulty data could also perpetuate or introduce new biases in financial decision-making," according to Yellen.

Could be extended to other fields

[Anonymous Coward]

... this is an insightful cautionary warning of some of the often not said drawbacks of current AI. With the horsepower required to create a model from scratch, along with all the raw data, there aren't a lot of options of upstream providers of AI. Doesn't most everyone use Meta's Pytorch, and Huggingface? GPT-J-6B finished model, "The Pile" data set etc...?

Reread as

[dmomo]

"First and foremost, we have to make sure that this benefits those who already hold wealth"

significant risk from Yellen

[roman_mir]

There is a non trivial risk that people like Yellen represent, she is a Treasury secretary (Debtory secretary actually) and she was a chair of the Federal reserve bank, that's definition of incest FYI and the baby, which is the economy, is really really ugly. Currently Powell is the Fed chair and he was an undersecretary of the so called Treasury a while back. It's like those porn videos, where they swap cum with each other, I hope I put that into your mind in such a way that you cannot escape the mental

Re:

[whitroth]

Geez... you're not a nerd, you're a brainwashed idiot.

I'm waiting for your screaming when a stock trade you make loses everything, after investing in a trade that was completely made up by a chatbot.

Re:

[dmomo]

Wow. Hot take. I make sensible trades, thank you very much. Did you actually READ the article?

Re:

[roman_mir]

What I wrote obviously doesn't fit into your tiny head, seems it is a common problem here, on /. and in the wider society in general, you cannot grasp concepts that are just beyond what is handed to you on a player, which is why you are what you are.

Too late

[iAmWaySmarterThanYou]

Programmatic high speed trading has been going on for many years. A huge percentage of trading activity (probably most of it but I'm too lazy to google an exact number) is automated right now.

Calling it "AI" won't change a thing.

Re:Too late

[Tony Isaac]

Many of those algorithmic tools are already using some form of AI (neural network pattern analysis). These can arguably *be* called AI, but they are certainly not new.

Re:

[geekmux]

Programmatic high speed trading has been going on for many years. A huge percentage of trading activity (probably most of it but I'm too lazy to google an exact number) is automated right now.

Calling it "AI" won't change a thing.

No, but firing all those pesky humans involved in managing and directing all that "programmatic" trading will change a thing or two.

Quite frankly, Yellen is more concerned about other aspects of our "financial" system being replaced by AI; like Federal Secretaries and such.

Re:

[iAmWaySmarterThanYou]

None of those big financial institutions and trading houses is firing all their quants in exchange for AI.

Zero chance. The very idea is mind boggling.

You ever worked tech at a finance company? For core money making function there is effectively no budget limits to anything that improves trade speed, accuracy or anything else that might produce an edge of any sort in the markets. Trillions of dollars are at stake. No one cares about the few million the quant guys make.

Re:

[bn-7bc]

Yup the floor at the NYSE is mostly a tv set now, the real volumes happens in a DC In NJ if memory serves

Significant risks?

[nospam007]

For *illionaires?
I can live with that.

Re:

[Tony Isaac]

...and for people who have money in 401(k)s or mutual funds. Most of those people are a lot more like you and your neighbors.

EatABagOdick

[NetNed]

Janet Yellen is a war mongering douche who should be in prison

What if AI enforced ethics?

[vladoshi]

If cannot be that difficult to teach it the law.