The CEOs of General Motors (GM), Ford (F) and Chrysler overlooked this basic fact when they flew to Washington in private jets to testify before Congress.

“We want to continue the vital role we’ve played for Americans for the past 100 years, but we can’t do it alone,” GM’s CEO Rick Wagoner told the Senate Banking Committee.

Tom Schatz, president of a watchdog group called Citizens Against Government Waste, huffed: “This is a slap in the face of taxpayers. To come to Washington on a corporate jet and asking for a handout is outrageous.”

You’d think that insight would rate a “Well, duh” – but apparently not from the auto industry’s top dogs.

Wagoner’s trip to Washington in a G4 private jet cost his struggling company an estimated $20,000 roundtrip. A commercial flight booked online would have cost about $576 for coach and $1,674 first class round trip.

Sure, sure – a CEO’s time is more valuable than gold, but there are cell phones and e-mail to keep in touch with the galley slaves back in Detroit – and electronic gizmos work on commercial flights and even in airport terminals or taxis.

Ford CEO Alan Mulally’s $28 million pay package includes the use of a private jet. He lives in Seattle and the company jet zips him home on weekends, ABC News reports.

The Fed’s own balance sheet has exploded from roughly $900 billion worth of debt in August to around $2 trillion as of last week. Knowledgeable sources expect that to reach $3 trillion by the end of the year.

That means that it will have grown from approximately 6% of gross domestic product to more than 20% in the space of four months. (For perspective, Japan’s balance sheet grew from roughly 9% of GDP to 29% over the 10-year period from 1994 to 2004, as it pursued “quantitative easing,” which basically involves the central bank making more cash available to banks to ease lending.)

These numbers and rates of growth are so enormous (and unprecedented) as to be utterly incomprehensible. Does anybody actually think the government has any idea what it’s doing?

I think it’s certainly dawning on folks that when the government “does something,” it often creates more problems than it solves. In this case, as it props up poorly managed companies, it may only be allowing them to rain further havoc on the better ones in their industry. American International Group is an example of this, and I’m sure many other financial entities will turn out to be as well. (As an aside, notice all the idiotic executives, across a wide range of industries, who have bought back hundreds of billions of dollars’ worth of shares at stupid prices — a classic example of blowing up their businesses in an attempt to manage the stock price.)

Though the government hasn’t admitted it yet, we are in a recession, and in this particular instance, it seems to me that creating jobs will be an unusually severe problem. That’s because the economic expansion we saw from 2002 to 2007 was essentially just a function of speculation (as I have stated often — and I explain in my book “Greenspan’s Bubbles”). I just cannot stop worrying about where the jobs are going to come from prospectively.

When I wrote that book, I pretty much exorcised my own demons regarding my revulsion and anger at the policies of former chief Alan Greenspan and his Federal Reserve. Recently, though, I couldn’t help but think how much better off everyone would be had the United States used the time after the equity bubble and the 9/11 attacks to pursue sound policies, as well as encourage folks to save money and prepare themselves for the demographic challenge of Social Security and rising health care costs.

Instead, Greenspan created a multiple-GDP-sized housing bubble, during which folks took on huge amounts of debt instead of actually saving money. It was only ridiculous financing (which has since imploded the banking system) that allowed so many folks to pay absurd prices for houses — and take money out of them at the same time via home-equity loans.

Of course, one of the most misguided government ideas was trying to prop up home prices. (Secretary Hank Paulson essentially conceded as much last Wednesday when he announced that the Treasury Department was abandoning its plan to purchase troubled mortgage assets.)

House prices need to come down to where folks can afford them. And prices may have to fall even further than we might have thought in the first place, because there’s going to be high level unemployment and probably not a lot of wage growth.

This is going to be a very unpleasant period, I’m sorry to say. The outcome we are witnessing is exactly why, during both the stock mania and the housing mania, I was so vociferous in my criticism of Greenspan. He is the one man who continually meddled with the market and continually advocated that folks behave in an irresponsible way.

You are truly a voice crying out from the wilderness with a message that has been MORE than validated through this current financial fiasco. I know that recovery will begin someday. But, in the meantime, I will be more at peace knowing that when it does I will be in a much better place to take advantage of it.

I wrote a column in 2006 called “The State of the Art.” It discussed the shifting paradigm for the financial industry as it sat at the crossroads of technology and regulation.

Two years later, the new world order has emerged.

Fannie Mae, Freddie Mac and AIG have been all but absorbed by the government.

Bear Stearns, Washington Mutual, Wachovia Corp. and Merrill Lynch were consumed by competitors.

Lehman Brothers ceased to exist altogether.

There are many ways to view this seismic shift. There’s anger (as expressed by Main Street), sadness (as savings are destroyed), fear (as reality bites) and confusion (as folks try to understand how this could happen in the first place). And then there’s anticipation, as we cast an eye forward and look for the phoenix that will eventually arise from the scorched earth.

The unfortunate capital market destruction is an inevitable comeuppance, the cumulative result of risk gone awry. It’s been percolating under the seemingly calm surface for several years, magnified by financial engineering and consumed by an immediate gratification society.

The socioeconomic consequences will be pervasive as we endure the other side of the business cycle, an unenviable retrenchment that politicians and policy makers tried so hard to avoid. It’s certainly scary as new beginnings always are.

Therein lies the opportunity.
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The longest recession ever — the Great Depression — lasted 44 months. In the 13 recessions dating back to 1929, the median S&P; 500 bottom occurred 58% of the way through the recession.

If our current conundrum is on par with the worst financial crisis in history in terms of duration and we assume that the business cycle peaked in the fourth quarter of 2007, we could extrapolate that the stock market bottom will arrive in the first quarter of 2010.

The media portrays the Great Depression as time when everyone in America stood on street corners waiting in a bread line. A closer look shows that much like today, economic hardship for the middle class began well before 1929.

History teaches us that the stock market crash didn’t cause the Great Depression; the Great Depression caused the stock market to crash. It was a manifestation of economic deterioration, much like the modern day sub-prime mortgage implosion.

Social mood and risk appetites shape financial markets, they always have and they always will. The current stock market malaise is, in many ways, simply catching up with preexisting societal acrimony.

We’ve got a few lean years ahead but that’s nothing to fear. In fact, it’s a healthy and positive progression. To get through this, we need to go through this. As painful as that process is, it takes us one step closer to an eventual recovery.

I view the Great Depression as the framework for optimism. Most of society worked, great discoveries were made and formidable franchises were established.

Walt Disney built their global reach during that period.

Hewlett-Packard was born on the back end.

Texas Instruments, Tyson Foods and Continental Airlines were created.

Indeed, if the greatest opportunities are bred from the most formidable obstacles, we’re about to enter an auspicious era where vast opportunities await those who are proactively prepared.
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The past few decades were about wealth, accumulation and conspicuous consumption but we’ve now entered a period that is entirely more austere, if not more sensible. Debt reduction and the rejection of materialism will continue to manifest as we come to terms with doing more with less.

Flashy rides and big-ticket items that were once badges of honor now serve as hollow reminders of misplaced priorities. Humility, once viewed as weakness, will be embraced.

Doing for others — rather than asking what others can do for you — will become increasingly common as people appreciate what they have rather than constantly complaining about what they don’t.

It’s a lesson I learned long ago and I’m a better man for it.

This mess is a bitter pill to swallow, particularly for the mainstream American who doesn’t know a derivative from a dividend. We can point fingers and wallow in the “why” or take a deep breath and begin the process of recovery.

Something good comes from all things bad and the greatest wisdom is bred as a function of pain.

It’s unfortunate that the structural foundation of the global capital market system had to shake before people — and policy makers — paid attention, but it is what it is, and we’ll do what we must.

Surround yourself with people you trust. Practice risk management over reward chasing. Preserve capital, reduce debt and become financially aware of your surroundings.