There has been an interesting colloquy of sorts between Commissioners Keith Hennessey and Bob Graham about the purpose of the Commission.

Hennessey has decried his colleagues’ line of questioning as not relevant to the roots of the crisis as well as the fact that the panel is questioning what he views as two "outliers" in AIG and GS. Graham has tried to rebut Hennessey, asserting that the "economic crisis" is still not over so the "roots" are still ongoing, and that questions about their specific business practices are still relevant now.

Both Commissioners are a little off in their reasoning. While Hennessey is right that AIG and GS are "outliers", both firms played integral roles in the development of the crisis–understanding why they failed or succeeded would help understand the roots of the crisis. Additionally, business practices of these two firms certainly were emulated by peers to greater or lesser degrees, so asking about specific business practices is indeed relevant.

As for Graham, it is hard to see how AIG and GS actions concerning derivatives in ’07 and ’08 are contributing the continuation of high unemployment now.

The Commission needs to ask questions in varying degrees of generality. Why were firms like AIG so reliant on specific models, without regard to market signals? GS continues to assert they "always" pay attention to the market and don’t hinge their business on models, but are they just Monday Morning Quarterbacking? What about the institutional culture in these firms that led to underestimation of risk?

Hennessey is right in one sense that questions that are too specific will not help the Commission produce a report that will inform regulatory agencies in the future.