It is not at all obvious that the additional regulations that Chair Gensler seeks to impose will improve the markets for U.S. Government Securities. What would seem obvious is that the regulations will impose meaningful additional costs on participants in the market, at a time when the federal deficit is soaring. In short, if the cost of trading in U.S. Government Securities goes up, that increase in cost will be borne by taxpayers whose tax dollars go to pay interest on the debt.

A regulator could assert that every data set is flawed in that it reflects events in the past at time when there was racial bias, or that current data is inherently biased.  Further, large AI models are by their very nature not transparent.  So, this CRS report is a warning to lenders that they may be breaking the law just by their use of AI. This demands a response by policymakers, at least to provide guidance to lenders on how they can assure compliance.

When every impacted party - the buy-side, the sell-side, and the custodial side - criticizes a proposed regulation as impractical and expensive, that should strongly suggest to the regulator that the proposal will not work.

New York State has moved fairly quickly from being a leading jurisdiction for digital asset businesses to shutting them down almost entirely. The indeterminacy of the proposed requirements ("high standards of commercial honor," while borrowed from FINRA has no clear meaning), the strictness of the proposed requirements (in the regulated financial industry, many firms serve in dual roles) and the harshness of the penalties are further deterrents to firms signing up to be regulated under New…