Michael Barr, vice chairman for supervision of the Board of Governors of the Federal Reserve, testifies during a House Committee on Financial Services hearing on oversight of prudential regulators on Capitol Hill on May 16, 2023 in Washington, DC.

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The Federal Reserve’s top banking regulator expressed caution Tuesday about the impact artificial intelligence could have on efforts to ensure disadvantaged communities have fair access to housing.

Fed Vice President for Supervision Michael S. Barr said that AI technology has the potential to “get credit to people who might not otherwise have access to it.”

However, he added that it can also be used for nefarious means, most notably to exclude certain communities from housing opportunities traditionally through a process known as “redlining”.

Barr said in prepared remarks for the National Fair Housing Alliance, “While these technologies hold enormous potential, they also carry the risk of violating fair lending laws and perpetuating the inequities they purport to address. “

As an example, he said AI could be manipulated to perform “digital redlining”, resulting in denial of access to credit and housing opportunities for majority-minority communities. In contrast, “reverse redlining” occurs when “more expensive or otherwise substandard products” are pushed into minority sectors in lending.

Barr said the work being done by the Fed and other regulators on the Community Reinvestment Act will focus on ensuring that disadvantaged communities have equal access to credit.


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