Warren Remarks at Vanderbilt Policy Accelerator Event Highlighting Economic and Financial Risks of Potential AI Crash

Warren Remarks at Vanderbilt Policy Accelerator Event Highlighting Economic and Financial Risks of Potential AI Crash

"(A)rtificial intelligence has enormous potential... But the impact on our economy is not so hard to see. I know a bubble when I see one. The parallels to the 2008 financial crisis are striking"

"We need to prepare now for a possible crash by putting in place simple structural reforms to protect American families, workers, and small businesses."

Watch speech here (YouTube)

Washington, D.C. - Today, at Vanderbilt's The Looming AI Crisis event, U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, warned that the debt-driven AI bubble could pose significant risks to our economic and financial stability. She drew parallels to the 2008 financial crisis and underscored that a crash in the AI sector could hurt households and workers across the whole economy. She laid out her ideas for reform and called on Congress to have the courage to get it done.

These remarks follow Ranking Member Warren's calls for the Trump Administration to investigate AI debt-related financial and economic risks.

"AI companies are aware of these risks-very aware. Instead of reducing their borrowing, slowing their rate of growth, and cleaning up their balance sheets, they are making the classic billionaires' move: they are quietly lining up for a handout. They have already lobbied the Trump administration for taxpayer funding and guarantees to cover themselves if things go south. As these firms lay the groundwork for future bailouts, we need to lay the groundwork for future reform now," said the Senator.

Below are the Senator's remarks as prepared for delivery:

Thank you to the Vanderbilt Policy Accelerator for organizing today's event to discuss a possible crash triggered by artificial intelligence and how to rebuild if it hits.

Let me first say that artificial intelligence has enormous potential. I cannot say what the future of this technology will hold-what new inventions or expanded capacities will bring. But the impact on our economy is not so hard to see. I know a bubble when I see one.

The parallels to the 2008 financial crisis are striking: the reckless behavior of a few billionaires and Big Tech CEOs has turned a promising technology into a structural risk to our financial system.

We need to prepare now for a possible crash by putting in place simple structural reforms to protect American families, workers, and small businesses.

We've seen this movie before. Washington spent the 1990s and early 2000s slashing the financial safeguards implemented following the Great Depression. The goal was to free Wall Street from any and all "constraints" so that financial innovation could flourish.

I - along with many experts and consumer advocates - rang the alarm, especially as evidence grew that lenders were tricking unsuspecting families into dangerous subprime mortgages. Foreclosure rates started picking up. But rather than pulling back, banks, and their private lending counterparts in the shadows of the financial system, sliced and diced these risky loans and offloaded the risk throughout the financial system in complex and opaque ways. Policymakers ignored warning signs, even as risk heated up. On the surface, the economy looked good, and a flood of campaign cash flowed from Wall Street to Washington-a flood that dampened any enthusiasm to rein in the billionaire's party.

Eventually, the music stopped and the whole economy came crashing down. Nearly $20 trillion in household wealth vanished. Millions of people lost their jobs, lost their homes, and lost their savings. Congress quickly authorized a $700 billion Wall Street bailout, while homeowners got pretty much nothing. No big bank CEO or executive went to jail-not one.

Lawmakers were flatfooted. Instead of restoring simple, structural reforms, they passed mostly modest and complicated technocratic reforms that failed to address the systemic flaws and inequities entrenched in our financial system. One exception was the Consumer Financial Protection Bureau - but that was only possible because we had developed and built some support for the agency before the crash hit.

Big Tech and other AI companies are on track to spend trillions of dollars to be the dominant AI player. They justify this spending on the speculative premise that demand for AI services and products will meet their wildly aggressive revenue projections. To justify the cost of these investments, the industry will need to generate roughly $2 trillion in annual revenue by 2030. Let's put that in context. In 2025, the industry generated $20 billion in revenue-about 1% of what they will need to earn in four years just to break even. Sure, the industry is growing, but the mismatch between investment and demand is spectacular-and not in a good way. According to analysts, the AI bubble is already 17 times the size of the dot-com frenzy and four times the size of the housing bubble.

The AI companies have a growing addiction to debt. They are borrowing staggering sums to finance trillions of dollars of spending on data centers, chips, and other AI infrastructure. To fund their habit, these companies have turned to shadowy lenders, like private credit funds, and started using convoluted debt structures. Giant banks are also helping finance AI companies both directly through their own loans and indirectly through lending to private credit funds that lend to AI.

This toxic combination creates a dizzying web of interconnected banks and shadow banks and deliberately obscures both how much risk is building in the system and exactly where those risks will fall when a crash comes.

The complexity itself could trigger that crash. If AI companies are unable to increase revenues with lightning speed, they won't be able to service their massive debt loads, and because of shady accounting strategies, the first big stumble will have everyone running for the exits - potentially triggering destabilizing losses in the financial sector and another 2008-style financial crisis.

To make matters worse, all of this is developing against a backdrop of two other destabilizing initiatives from the Trump Administration. First, deregulating Wall Street and Wall Street banks so that there is less oversight and less confidence in the stability of these giants, and second, trying to stuff these toxic financial products in Americans' retirement accounts so any downturns will be felt even more broadly through the economy. The Trump moves will leave both the financial sector and retirement savings increasingly fragile at the worst possible moment.

An AI industry crash threatens our entire economy. Retirement savers could see their life savings evaporate in a flash and, if the banking sector is imperiled, credit in other sectors will dry up, so that workers in industries completely detached from AI could face layoffs and small businesses could experience difficulties accessing credit.

AI companies are aware of these risks-very aware. Instead of reducing their borrowing, slowing their rate of growth, and cleaning up their balance sheets, they are making the classic billionaires' move: they are quietly lining up for a handout. They have already lobbied the Trump administration for taxpayer funding and guarantees to cover themselves if things go south. As these firms lay the groundwork for future bailouts, we need to lay the groundwork for future reform now, including:

• Restore simple structural guardrails to prevent the Wall Street debt machine from imperiling our economy once again;
• Create a new digital regulator to enforce antitrust, consumer protection, and data privacy laws so a few Big Tech giants cannot wield their outsized market power to raise costs for consumers, lessen innovation, and stifle competition;
• Ensure Big Tech pays its fair share in taxes so we can invest in lowering costs and creating good jobs;
• Move manufacturing jobs home, so creating the chips that power AI creates jobs in America, not elsewhere; and
• Establish accountability for those who help orchestrate the next crash-no more bailouts that leave American families holding the bag.

American families and workers cannot afford another economic catastrophe. They are still picking up the pieces left by the Great Financial Crisis of 2008. This time around, Congress needs to be ready with a durable reform agenda to prevent the next big crash and the courage to get it done.

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