Ahead of Committee Hearing on AI and the American Dream, Warren and Blumenthal Introduce the AI Bubble Transparency Act

Ahead of Committee Hearing on AI and the American Dream, Warren and Blumenthal Introduce the AI Bubble Transparency Act

Legislation directs the Office of Financial Research (OFR) to collect data from financial companies on their AI-related exposures

Bill Text (PDF)

Washington, D.C. - U.S. Senators Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, and Richard Blumenthal (D-CT) introduced the AI Bubble Transparency Act, which would direct the Office of Financial Research (OFR) to collect data from financial companies on their AI-related exposures.

"AI and Big Tech companies are increasingly reliant on shadowy forms of debt and balance sheet magic to fund their multi-trillion dollar AI buildouts. The AI Bubble Transparency Act will give regulators and Congress the information they need to identify risks early and protect our economy from another preventable financial crisis," said Ranking Member Warren.

"AI companies are increasingly relying on opaque debt markets and shadowy circular arrangements to fund their buildouts, putting our markets at risk. The AI Bubble Transparency Act ensures that Congress has access to the information needed to identify potential risks that could trigger a broader financial crisis-prioritizing Americans' financial stability over the interests of Big Tech companies and protecting consumers from preventable economic harm," said Senator Blumenthal.

The bill is endorsed by Americans for Financial Reform (AFR): "The breakneck growth of the AI industry is largely being financed in the shadows, where private Wall Street funds can engage in self-dealing, take on excessive leverage, and fuel dangerous levels of financial interconnectedness - all while keeping the details of those activities hidden from the public and from regulators," said Maya Jenkins, a senior policy analyst at AFR. "The AI Bubble Transparency Act would bring the details of these risky activities out of the shadows, providing policymakers in Congress and across the financial regulatory agencies with the information they need to identify and mitigate threats that the growing AI bubble poses to financial stability. As Wall Street firms continue to make risky bets on AI with working families' savings, lawmakers' ability to monitor financial institutions' exposure to AI will be foundational to the fight to protect workers' livelihoods and financial stability from AI-related threats."

"Trillions of dollars in AI investment rest on complex financial engineering that poses real risks to our economy, and we don't know enough about it," said Asad Ramzanali, Director of AI and Technology Policy at the Vanderbilt Policy Accelerator."Policymakers and the public need information to be able to sort out the entangled financial relationships that ultimately put the pocketbooks of American families at risk."

Specifically, the AI Bubble Transparency Act would:

• Require OFR to collect and provide to Congress data from financial institutions-banks, insurers, private credit funds, and others-about their exposure to debt and equity instruments connected to AI companies, including chip makers and data centers, cloud providers and hyperscalers, model originators and developers, and data infrastructure operators.
• Direct the Financial Stability Oversight Council (FSOC) to issue a public report on the findings of the data collection, including evaluating the breadth of the financial institutions' exposure to AI-related debt and equity instruments and the channels through which an AI-driven shock could ignite instability and imperil the financial system.
• Require FSOC to make recommendations to financial regulatory agencies and Congress to mitigate AI-driven financial stability risks based on the findings of the data collection.

Ranking Member Warren has been sounding the alarm on the potential consequences of an unchecked AI-driven financial bubble for the financial system and for Americans across the country. In January, she led her colleagues in urging FSOC Chair and Treasury Secretary Scott Bessent to launch a formal inquiry into the financial stability risks posed by the rapid growth of debt connected to the AI industry, and to partner with OFR to compel financial data from financial institutions. Treasury failed to confirm that it would move forward with this investigation, but the AI Bubble Transparency Act would require Treasury to initiate this data collection.

Senator Warren also sent a letter to Banking, Housing, and Urban Affairs Committee Chairman Tim Scott (R-SC) urging him to hold an additional hearing on AI policy with Trump Administration officials on the President's approach to regulating AI companies, as well as the Administration's failure to meaningfully oversee the industry. In the letter she called on Secretary Bessent to testify on his plans to protect American consumers and the financial system from risks associated with Big Tech's growing role in AI.

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