Labor & Employment Law Daily Wrap Up, ECONOMIC NEWS—Fed’s Cook ‘optimistic’ about AI, but notes risks to economy, jobs, (May 29, 2026)

By Nora Macaluso

The Fed is looking at ways AI can help streamline some complex processes while maintaining accuracy and integrity.

Federal Reserve Governor Lisa Cook said she’s “optimistic” about the promise of artificial intelligence to increase productivity and innovation, while remaining cautious about its risks.

“The financial sector is adapting to the current generation of AI tools and increasing its adoption, initially in highly manual or resource-intensive areas” such as compliance, call centers, and back-office operations, Cook said in remarks prepared for delivery at Stanford University. AI is also helping financial companies with “age-old problems, such as updating legacy code and integrating systems,” in addition to newer functions like cybersecurity, she said.

“Broadly, I see AI as stimulating economic growth, which all else equal, should support financial stability,” Cook said. “However, as a policymaker, I understand that innovation can lead to increased risk, if not monitored appropriately.”

Potential vulnerabilities include the threat of algorithmic trading to financial stability, the risk of displacement or disruption of “entire sectors” and related credit exposure, and cybersecurity risks, Cook said.

The Fed itself is “working to responsibly deploy AI to advance our mission and to improve our own work,” she said.

The Fed’s Division of Financial Stability has formed teams of experts to assess technological risks to financial stability and how AI is creating vulnerabilities and opportunities, she said. These teams’ research on “herd behavior in investment decisions” has shown that AI agents “make more rational decisions than humans,” a finding that “could potentially lead to fewer asset price bubbles arising from animal spirits,” she said.

Another team developed a tool to classify large amounts of text that achieved an 80 percent reduction in computation costs, and an “agentic AI sprint” provided insight into potential new approaches to complex tasks, she said.

“The totality of our experience with AI leads us to the conclusion that, alongside experimentation, strong governance and risk management must be our foundation,” Cook said. “The most promising approaches augment human judgment with AI capabilities while building verification into the architecture itself.”

“The urgency is real,” said Cook. “AI is advancing rapidly, and financial institutions are adopting these technologies apace. As policymakers, we must understand these systems through hands-on experience.”

“With appropriate governance frameworks, autonomous intelligence can potentially expand our analytical capabilities,” Cook concluded. “These tools could enhance our capacity to identify and respond to evolving threats. But we proceed with both optimism and caution, as warranted at this moment of a technological inflection point.”

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