But here’s one nugget. Brooksley Born, the former head of the Commodity Futures Trading Commission, which regulates certain kinds of derivatives, used her time to ask Buffett multiple questions about the financial instruments, contracts derived from the price of another asset that will come under new regulation once the financial regulatory reform bill passes. Derivatives trading accounts for up to 40 percent of revenue at some Wall Street banks, and their regulation is the subject of intense lobbying by financial firms that do not want to have to exchange-trade derivatives or put trades through clearinghouses.

Born quoted Buffett’s shareholder letters declaring derivatives “financial weapons of mass destruction, carrying dangers that while now latent are potentially lethal” and “time bombs both for the parties that deal in them and the economic system.”

In response to questions about the instruments, Buffett said that derivatives “accentuated enormously the leverage in the system” and contributed to the financial collapse. He described his acquisition of reinsurance company GenRe, which came with 23,000 derivatives contracts, and how he sold off all of them for $400 million at a loss because he felt he could not understand them. “It was impossible,” he said, noting he had never heard of most of the counterparties and “couldn’t pronounce their names.”

“The only answer was to get out of the business,” he said.

Born asked whether major investment banks, such as J.P. Morgan Chase, have the capacity to understand their derivatives contracts and their risks. Buffet replied, “I think they’re dangerous. I’ll say this: I don’t think I could manage them. … It’s hard for me to imagine a regulatory system that could supervise something like that.”

Finally, Born asked him, “In your view, is the derivatives market still a time bomb ticking away?”

Buffett responded, “I would say so.”

A little background: After the Great Depression, a Congressional panel called the Pecora Commission investigated Wall Street’s misdeeds and set the stage for financial regulations that lasted for decades. Since the current meltdown, some have been calling for another commission. That seemed unlikely at first, because Congress itself undid many of the regulations the Pecora Commission created — and it appeared unlikely lawmakers would choose to investigate themselves.

But that view has turned out to be overly skeptical. Reuters reported recently that Congress in on the verge of naming members to a bipartisan panel known as the Financial Crisis Inquiry Commission, based on the Pecora model. While that should be welcome news, some of the names emerging as possible panel members are already causing consternation.

From Reuters columnist Matthew Goldstein:

But there are already worrying signs that this commission will lack the political nerve to tackle the tough issues, let alone ask the right questions. Reuters reported last week that some of the people being considered for the commission include many former Congressmen, governors and familiar talking heads from Washington think tanks. Let’s hope that will not be the case because the financial system can’t truly be fixed until there’s a candid assessment of who let things get so out of control.

Sure, put some wise political statesmen on the commission. But also allow room for some longtime Wall Street critics, derivatives traders and hedge fund managers — the kind of people who know the system from the inside out.