The House Budget Committee — which is led by House Budget Committee Chairman Paul Ryan (R-WI) — is holding a hearing today titled “The Broken Budget Process: Perspectives From Budget Experts.” The lead witness at the hearing is former Sen. Phil Gramm (R-TX).

For those who don’t remember, Gramm gained notoriety in 2008 when he, as an adviser to Sen. John McCain’s (R-AZ) presidential campaign, said America was only in a “mental recession.” “We have sort of become a nation of whiners,” he said. “You just hear this constant whining.”

That “mental recession,” of course, has cost 14 million Americans their jobs.

But Gramm has made far worse contributions to the nation’s economy. In 2000, he snuck the Commodity Futures Modernization Act into an unrelated, 11,000 page appropriations bill. That act ensured that the huge market in over-the-counter derivatives stayed unregulated, laying the groundwork for the 2008 financial crisis (and the implosions of AIG and Lehman Brothers). He then left Congress for a posh job with mega-bank UBS (where a rogue trader just lost more than $2 billion).

On budget-related matters, Gramm “lent his name and energy to passage of the first Reagan budget in 1981, whose sweeping tax cuts failed to prevent recession — and eventually required a long series of tax increases, beginning in 1982, to stanch the enormous deficits they created.” Gramm’s also believes that there should be no minimum wage and has derided the working poor by saying, “we’re the only nation in the world where all our poor people are fat.”

This is not the first time that the House GOP has sought Gramm’s input on budget matters. And with the nation facing a jobs crisis and a structural deficit that needs to be brought down over the next several years, sage budget advice would indeed be useful for Congress. Instead, the House GOP has turned to a man who played an outsized role in blowing up the federal deficit before he turned his efforts to blowing up the global economy.

Texas Gov. Rick Perry (R) yesterday jumped in the 2012 GOP presidential primary, saying that “it is time to get America working again.” “I will work every day to make Washington, DC, as inconsequential in your lives as I can, and free our families, small businesses and states from a burdensome and costly federal government so they can create, innovate and succeed,” he said. And Perry quickly picked up the endorsement of former Sen. Phil Gramm (R-TX):

Former senator and current banker Phil Gramm of Texas — well-connected to big donors but controversial for his role in preventing tighter regulation of Wall Street — told The Huffington Post yesterday that he is endorsing his former student and political protege, Texas Gov. Rick Perry...”I’m for Rick and I will do what I can to help,” Gramm said in an interview in Detroit. “He has been an effective governor. He is a determined guy from a small town who knows how to get things done.”

In 2008, Gramm, who was advising Sen. John McCain’s (R-AZ) presidential campaign (and was floated as McCain’s choice for Treasury Secretary) gained notoriety for saying that the country was “a nation of whiners” that was only in a “mental recession.”

But Gramm’s legacy goes much deeper than that. In 2001, he tucked the Commodity Futures Modernization Act into an unrelated, 11,000 page appropriations bill. That act ensured that the huge market in over-the-counter derivatives stayed unregulated, laying the groundwork for the 2008 financial crisis (and the implosions of AIG and Lehman Brothers). He also believes there should be no minimum wage and has derided the working poor by saying, “we’re the only nation in the world where all our poor people are fat.”

Perry was a student of Gramm’s at Texas A&M, and when Perry became governor “Gramm and his bank pushed a controversial proposal to allow the company to take out insurance polices on teachers and other workers, even though the workers themselves would not benefit.” If Gramm’s support is any indication, Perry’s zeal for financial deregulation will know no bounds.

This week, Pat Toomey, Pennsylvania’s Republican Senate candidate, has experienced a bit of selective amnesia regarding his often full-throated support for privatizing Social Security. However, on the campaign trail Wednesday he was not at all coy about his support for deregulating derivatives on Wall Street, the very instruments that helped bring down the financial system.

In 2000, former Sen. Phil “mental recession” Gramm (R-TX) attached the Commodity Futures Modernization Act to an unrelated, 11,000 appropriations bill which was passed “on a Friday evening two days after the Supreme Court handed down its Bush v. Gore ruling and as Congress was rushing home for Christmas.” The bill ensured that the growing market in over-the-counter derivatives, including credit default swaps, stayed entirely unregulated, against the advice of people like former Commodity Futures Trading Commission Chair Brooksley Born (who accurately predicted the havoc derivatives would cause).

Toomey — then a member of the House of Representatives — voted for that bill, and said that he would do it again, as “that bill did absolutely nothing to cause the financial crisis”:

“That bill did absolutely nothing to cause the financial crisis, and no credible person has tried to make that argument,” Toomey said…Asked whether he’d vote for it again, he said: “Yes. I think all 377 (House members) would vote for it again.”

Of course, plenty of credible people — including Nobel Prize winner Joseph Stiglitz — have pointed to the destruction wrought by the lack of derivatives oversight. By keeping regulators away from the OTC derivatives market — which is several times the size of the entire U.S. economy — the Commodity Futures Modernization Act set the stage for the financial crisis and huge government bailouts of 2008, particularly that of the insurance giant/hedge fund American International Group, as David Min and I explained:

Lehman Brothers Inc. and insurance giant American International Group’s inability to honor their many billions of dollars in credit default swap derivative obligations caused investors to question the value of the many financial instruments tied to credit default swaps, causing a classic run on the bank situation for the unregulated parts of the financial system. It was this run on the so-called “shadow banking system” — which performs the functions of banking but outside the regulatory safeguards in place for banks — that led to the bailout of AIG.

Because of the bill that Toomey backed, this huge market grew and grew entirely out of the view of regulators, and was so opaque that even the financial institutions involved in it were unclear as to what was going on.

The Dodd-Frank financial reform bill that was signed into law this year brings the derivatives market out of the dark and sets up a mechanism for ensuring that financial firms trading derivatives have adequate collateral backing them up. So would Toomey advocate that we dismantle these common sense safeguards?

Today, Phil “mental recession” Gramm has an op-ed in the Wall Street Journal disputing the notion that the deregulation he promoted while in the Senate had anything to do with the financial crisis. Gramm — the poster child for a movement defending deregulation and blaming Clinton-era housing programs for the meltdown — relied on a series of tired conservative tropes in an attempt to exonerate himself from well deserved culpability.

Gramm: It was the Community Reinvestment Act!

No it was not. Only six percent of the subprime loans made by CRA-covered lenders went “to lower-income borrowers or neighborhoods.” It was non-bank mortgage companies — not covered by CRA — that originated 50 percent of subprime loans.

Gramm: Fannie and Freddie encouraged the poor people!

This is a favorite of the right, but Fannie and Freddie “had nothing to do with the explosion of high-risk lending.” The two undeniably fueled the securitization fire, but it was their chief regulator — the Office of Federal Housing Enterprise Oversight — that utterly failed to prevent them from investing in toxic mortgages, while the Bush administration appointed supervisors who made it clear that they planned to deliver less supervision over the financial services industry.

Gramm: Credit default swaps are fine!

No, they’re not. In his finest moment, Gramm shielded swaps from regulatory oversight by slipping a rule into an unrelated budget bill in 2000. The unregulated swap market reached a peak of $62 trillion. Taking advantage of this, AIG issued over $40 billion in swaps that it couldn’t honor, necessitating a government rescue.

The rescue of AIG and the collapse into bankruptcy of Lehman Brothers are the two defining moments of the current financial market meltdown, and Gramm’s fingerprints are all over both. Incidentally, Gramm is not through messing with the banking system. Just yesterday, the bank that he helps run, UBS, was sued by the American government for helping American clients “use secret accounts to evade U.S. taxes.” Old habits evidently die hard.

In recent days, Sen. John McCain (R-AZ) has been promising to “put an end to the reckless conduct, corruption, and unbridled greed that have caused a crisis on Wall Street.” This is an interesting development for McCain, who before this week was a champion of deregulation.

It is doubly interesting though, because McCain voted for the bill that deregulated Wall St. and allowed such “reckless conduct” to occur in the first place. And one of the bill’s architects was McCain economic adviser, former Sen. Phil Gramm (R-TX).

In 1999, Congress passed the Gramm-Leach-Bliley Act, which abolished “all of the significant rules put in place at the time of the Great Depression designed to prevent a repeat.” Specifically, this act “destroyed the Depression-era barrier to the merger of stockbrokers, banks and insurance companies.”

Yesterday, a group of economists, including Nobel Prize winner Joseph Stiglitz, slammed Gramm for having a “mentality that doesn’t understand the nature of systemic risks in financial systems,” and said that his bill helped create the current financial turmoil:

Economic experts say that Gramm and others are to blame for the current crisis that is shaking Wall Street.

Gramm’s successful effort to pass banking reform laws in 1999, which reduced decades-old regulations separating banking, insurance and brokerage activities, helped to create the current economic crisis.

“As a result, the culture of investment banks was conveyed to commercial banks and everyone got involved in the high-risk gambling mentality. That mentality was core to the problem that we’re facing now,” Stiglitz says.

Lakshman Achuthan, managing director of the Economic Cycle Research Institute, said that “we were setting up this bonfire years ago — the deregulation, the inordinate amount of liquidity given to the system all set the stage for the bubble and the bust.”

So McCain is promising to put an end to the “reckless conduct” that he voted to allow, while being advised by a team that still believes rampant deregulation is the way to go.

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