Governments habitually bail out enterprises deemed too important to fail. Are taxpayers better or worse off?

Unfortunately, we can't say definitively because we only observe the world under the policy that was adopted, not under the opposite policy.

That doesn't mean we can't make some educated guesses.  We made some money on the 1979 Chrysler bailout but lost a net $132 b. on the S&L bailout of the late 1980s.  There would have been a lot of jobs and income lost if we hadn't acted then, but it's hard to say how much.  On balance, we're probably better off, but it's impossible to prove.

Last Sunday, Treasury Secretary Hank Paulson proposed to temporarily increase the present law $2.25 b. Treasury lines of credit for the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, to allow Treasury to purchase GSE equities, and to establish a consultative role for the Fed in establishing GSE capital requirements.