#AI OpenAI - ChatGPT: In America, is hindering stealth invasions of e.g., artificial intelligence and bank regulations, a responsibility of e.g., Homeland Security?

I asked ChatGPT:

"If any declared enemy to America’s ideology managed to smuggle into its Artificial Intelligence an algorithm that produced results totally contrary to the intent of its Founding Fathers, would that not be dangerous?"

ChatGPT answered: 

"If an enemy managed to smuggle into America's artificial intelligence (AI) an algorithm that produced results contrary to the intent of its Founding Fathers, it could potentially be concerning or dangerous. However, it's important to note that the development and implementation of AI algorithms are subject to extensive scrutiny and regulation, particularly in critical areas such as national security and defense.

The intent of America's Founding Fathers was to establish a democratic society that upholds principles such as liberty, justice, and individual rights. If an AI algorithm were to undermine these principles or manipulate information in a way that threatens the foundations of democracy, it would indeed be a cause for concern.

To mitigate such risks, the development and deployment of AI systems, especially those with potential national security implications, involve rigorous safeguards, security measures, and oversight. Multiple layers of scrutiny are typically in place to ensure the integrity, safety, and ethical use of AI technologies. These may include thorough testing, audits, regulatory frameworks, and active monitoring by human experts.

Moreover, the development of AI is a collaborative effort involving researchers, engineers, policymakers, and experts from various fields. The collective expertise and diverse perspectives help prevent any single individual or entity from exerting unilateral control over AI algorithms, reducing the likelihood of a malicious actor successfully smuggling an algorithm contrary to the nation's values.

While there are risks associated with AI, it's important to approach these concerns with an understanding of the complex mechanisms involved in AI development, regulation, and deployment. Continuous vigilance, robust oversight, and adherence to democratic principles are vital in safeguarding against potential threats to America's ideology or any nation's fundamental values."

I asked ChatGPT:

"In the same vein, if foreigners smuggled into America’s bank regulations that preferentially allocated bank credit to the Federal Government, in detriment of “We the People” e.g., the access to credit of small American businesses access, would that not be dangerous?"

ChatGPT answered: 

"If foreign entities were to manipulate or influence America's bank regulations in a way that preferentially allocated bank credit to the Federal Government, potentially disadvantaging small American businesses' access to credit, it could indeed have negative consequences and be considered dangerous.

In a healthy and well-functioning economy, access to credit is crucial for small businesses to grow, innovate, and create jobs. If regulations were altered to give preferential treatment to the Federal Government, it could lead to a distortion in the allocation of credit, potentially limiting the availability of financing for small businesses. This could hinder their ability to expand, compete, and contribute to economic growth.

However, it's important to note that the formulation and implementation of bank regulations involve a complex process that includes input from various stakeholders, including industry experts, economists, policymakers, and regulatory bodies. While it's crucial to guard against undue influence, the system is designed to incorporate checks and balances to prevent such preferential treatment.

Additionally, bank regulations in the United States are typically subject to thorough scrutiny and public debate, providing opportunities for stakeholders to voice concerns and participate in shaping these regulations. This democratic process helps ensure that the interests of "We the People" are considered and protected.

If there were evidence of foreign entities unduly manipulating bank regulations to favor the Federal Government over the broader interests of the American people, it would be a matter of great concern. It would be important for regulatory bodies, policymakers, and the public to address and rectify such issues, ensuring transparency, accountability, and fairness in the regulatory framework.

Overall, preserving the integrity of bank regulations and safeguarding fair access to credit for all participants, including small businesses, is crucial for a healthy and vibrant economy."

I asked ChatGPT:

"Is hindering such stealth invasions not a responsibility of e.g., Homeland Security?" 

OpenAI answered: 

"Yes, safeguarding against potential stealth invasions and protecting national security is indeed a responsibility of government agencies such as Homeland Security in the United States. Homeland Security's primary mission is to prevent and respond to various threats, including those that could undermine the country's critical infrastructure, economic stability, and democratic processes.

In the context of your question, if there were attempts by foreign entities to manipulate or infiltrate critical sectors such as bank regulations in a way that posed a threat to national security or the well-being of "We the People," it would fall within the purview of Homeland Security and other relevant agencies to address and counteract such actions.

Homeland Security, in coordination with other government entities, intelligence agencies, law enforcement, and regulatory bodies, works to identify and mitigate potential threats. They employ a range of measures such as intelligence gathering, cybersecurity protocols, risk assessment, regulatory oversight, and enforcement to protect critical systems and institutions from foreign interference or malicious activities.

Furthermore, Homeland Security collaborates with domestic and international partners to share information, develop strategies, and enhance resilience against emerging threats. This collective effort aims to detect and prevent any attempts to undermine the security, stability, or values of the United States.

While no system is completely immune to threats, the responsibilities of Homeland Security and other relevant agencies are focused on identifying, countering, and mitigating risks to national security. It is through these efforts that the government seeks to safeguard against potential stealth invasions and protect the interests of the nation and its citizens."

Note: The answers are copied exactly from those given to me by ChatGPT

Not the first time on the theme

Here my many other questions to ChatGPT – Grok on bank regulations

Bank regulators should be forced to see “Hell on Wheels” and read John Kenneth Galbraith’s “Money: Whence It Came, Where It Went”

In the TV series Hell on Wheels, its main character, Cullen Bohannon, when asked to testify before the US Senate about all the obvious corruption of Thomas ‘Doc’ Durant, someone absolutely not Bohannon’s friend, someone absolutely not one having been sanctimonious or behaved according to any social norms, repeats, over and over again, to the great chagrin of his interrogators: “The Transcontinental railroad could not have been built without Thomas Durant”

And John Kenneth Galbraith wrote in his “Money: Whence it came where it went” 1975 the following: “For the new parts of the country [USA’s West]… there was the right to create banks at will and therewith the notes and deposits that resulted from their loans…[if] the bank failed…someone was left holding the worthless notes… but some borrowers from this bank were now in business...[jobs created]

It was an arrangement which reputable bankers and merchants in the East viewed with extreme distaste… Men of economic wisdom, then as later expressing the views of the reputable business community, spoke of the anarchy of unstable banking… The men of wisdom missed the point. The anarchy served the frontier far better than a more orderly system that kept a tight hand on credit would have done…. what is called sound economics is very often what mirrors the needs of the respectfully affluent.”

And Galbraith also opined in his book that: “The function of credit in a simple society is, in fact, remarkably egalitarian. It allows the man with energy and no money to participate in the economy more or less on a par with the man who has capital of his own. And the more casual the conditions under which credit is granted and hence the more impecunious those accommodated, the more egalitarian credit is… Bad banks, unlike good, loaned to the poor risk, which is another name for the poor man.”

Therefore I cannot but conclude in that bank regulators should be forced to see “Hell on Wheels” and read John Kenneth Galbraith’s “Money: Whence It Came, Where It Went”. That in order to, hopefully, be able realize that with their risk weighted capital requirements for banks, these will not finance the risky future, but only refinance the safer past and present and, as a result, the economy will stall and fall. 

To add insult to the injury, bank regulators are doing all this in the belief that bank crises result from excessive exposures to what is perceived as risky, which is utter nonsense. Bank crises have always, and will always, result from uncertainties; that which includes unexpected events, like devaluations earthquakes and regulators not knowing what they are doing, criminal behavior and excessive exposures to something ex ante perceived as safe but that ex post turned out to be very risky.

“If you see something, say something”. Someone should run to the Homeland Security of the Home of the Brave and denounce that, most probably, unwittingly; some serious terrorism is taking place by means of dangerously risk adverse faulty bank regulations.

America "The Home of the Brave" is going down, because of bank regulators' silly/sissy credit risk aversion.

Banks use to decide whom to lend to, based on who offered them the highest risk adjusted interest rates. 

Not any more. Now banks have to calculate what those risk adjusted interest rates signify in terms of risk-adjusted rates of return on their equity. That is because with their risk weighted capital requirements, regulators now allow banks to hold less capital, and therefore be able to leverage more their equity, when engaging with The Safe than with The Risky.

And those perceived, decreed or concocted as belonging to The Safe, include sovereigns (governments), members of the AAArisktocracy and the financing of houses.

And those belonging to The Risky are SMEs, entrepreneurs, the unrated or the not-so good rated, and citizens in general.

And that of course has introduced a regulatory risk aversion that distorts the allocation of credit to the real economy. By guaranteeing “The Risky” will now have too little access to credit, that dooms the economy and the banks to slowly fade away.

But the banks and the economy could also disappear with a Big Bang. That because by giving banks incentives to go too much for The Safe, sooner or later, some safe havens will be dangerously overpopulated, and we will all suddenly find ourselves there gasping for oxygen.

In essence, because of this regulation, banks no longer finance the riskier future; they just refinance the (for the time being) safer past.

How did this happen? There are many explanations but the most important one is that regulators never defined the purpose of the banks before regulating these.

“A ship in harbor is safe, but that is not what ships are for.” John A Shedd, 1850-1926

PS. That also goes for the rest of the world. For instance the Eurozone was done in with it.

PS. Should this not be an issue for Homeland Security?

PS. Is that regulatory discrimination legally allowed?

PS. Risk-taking is the oxygen of all development

God make us daring!

Here is a fuller explanation of why the Basel Committee's bank regulators are idiots... or something much worse! 

Allowing for risk-taking is an absolute necessity for having a vibrant economy.

Senior government officials who have served Democratic and Republican administrations, and former leaders in Congress from both parties, the Coalition for Fiscal and National Security, urgently call out “Addressing Our Debt is a National Security Imperative”, as U.S. national security in the 21st Century depends on a vibrant economy, and it not being undermined by the accumulation of excessive debt.

Unfortunately their proposed “The Framework”, does not include correcting the one fatal regulatory mistake that has destroyed the economies of both the U.S. and Europe and is impeding these from becoming vibrant again.

And I refer specifically to that odious policy, especially so in “the land of the brave”, of allowing banks to hold less capital (equity) when lending to those who are perceived as safe, “The Infallible” than when lending to those perceived as “The Risky”.

That results in the banks being able to earn immensely higher risk-adjusted returns on their equity when lending to “The Infallible” than when lending to The Risky”, and which effectively locks out the latter from having a competitive access to bank credit.

And those regulations are the sad result of bank regulators not having defined the purpose of the banks to include the efficient economic resource allocation, and to being completely oblivious to the fact that in order to even have “The Infallible”, “The Risky” play a fundamental role.

That truly odious regulatory discrimination, in favor of those already favored by markets and banks on account of being perceived as “safe”, and against those already disfavored by markets and banks on account of being perceived as “risky”, is sapping the economies of the necessary risk-taking and entrepreneurial spirit to keep these vibrant.

And the truly sad part of this fatal regulations is that they do nothing to diminish the risks of major bank failures because these, with the exception of when fraudulent behavior has been present, have always resulted from excessive exposures to what was ex-ante perceived as absolutely safe, and never ever from excessive exposures to something that was perceived as risky when incorporated in the balance sheets of the banks.

I, among others while being an Executive Director at the World Bank, 2002-2004, warned about the consequences of this regulatory risk-adverseness, but I have mostly hit the wall of disbelief in that the regulatory experts could have been so dumb. Well friends, they were!

I am not a U.S. citizen but I know that much of the future well being of my family depends directly on the well being of U.S. and Europe, and so this is also for me a vital issue... a real National Security Imperative.

Thanks for the attention. If you need more explanations you will find me at your service.

Per Kurowski

PS. In my church they sing a psalm that prays for "God make us daring"

Homeland Security, bad bank regulations could be used as a lethal weapon of terrorism

Mark Twain is attributed having said: “A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain” and yes, we all know that bankers are characteristically risk-adverse. 

What then if someone somewhere concocted a biochemical agent that made the bankers even more risk-adverse, perhaps a testosterone reducer... a de-testosteroner. Would that not be classified as an act of terrorism, even if the chemist proved there was absolutely no bad intention?

But that is what effectively bank regulators did, when they allowed banks to have much less capital  (equity) when lending or investing in what was officially perceived as "absolutely safe", than the capital (equity) they were required to hold against any asset officially perceived as risky.

That allowed banks to earn higher risk-adjusted returns on equity when lending to "the infallible" than when lending to "the risky", something which introduced the mother of all distortions in how bank credit was allocated to the real economy.

As should have been expected, the result was a crisis that destroyed the economy of the US; by dangerously overcrowding the perceived safe-havens, like triple-A rated securities and infallible sovereigns (Greece); and by causing the equally dangerous underexposure to what is perceived as being risky, like in lending to small businesses and entrepreneurs. 

Honestly, is the willingness of the banks to take risks not a matter of national security for the Home Of The Brave?

Why do we so easily accept the distractionary explanation that the current crisis was caused by excessive risk-taking when so clearly all the serious losses have been in what was officially considered as the safest type of bank lending and investment?

PS. Here is a current summary of why I know the risk weighted capital requirements for banks to be dangerous nonsense.

PS. By the way, what would the Founding Fathers have said about this?

AI's ChatGPT seems to agree that would be a responsibility of Homeland Security

Dodd-Frank Act… legislative surrealism!

The Dodd-Frank Act signed today seems to me a surrealistic piece of legislation. 

Though the United States in June 2004 formally committed to implementing the Basel II bank regulations; and though the SEC in April 2004 delegated supervision decisions to the Basel Committee, surrealistically, there is not one single mention of these regulations, or of the Basel Committee for Banking Supervision, in all 848 pages of the Dodd-Frank Act. And this though the Act makes reference to foreign organizations like the Extractive Industry Transparency Review (EITI). It would seem like someone somewhere, has been playing some dirty tricks on someone.

PS. (Dated later) And it does not mention the fact that risk-weighted capital requirements for banks, in the home of the brave, does seem to be quite un-American. What do you mean regulators about discriminating against "the risky", those who are already being discriminated by the banks because they are perceived as risky?

The fact that the distortions in the allocation of bank credit caused by the risk-weighted capital requirements had not been understood, much less accepted, made it impossible for the Dodd-Frank Act to really serve its purpose... in many ways... by opening discussions on so many other fronts and thereby distracting the attention from what most urgently matters, only made it worse.

PS. Homeland Security. Bad regulations could be used as a lethal weapon of terrorism

PS. The complaint I presented to the Consumer Financial Protection Bureau

PS. In essence the Dodd-Frank Act did absolutely nothing to correct the most fundamental mistake in current bad regulations. It did not even recognize it!

PS. A letter published in Washington Post