Like probably many Americans, I go back and forth on the wisdom of certain govt. bailouts, but is it as simple as:
1) Estimate how much money the "taxpayers"* would lose should firms such as AIG fail.
2) Estimate the costs of the bailout.
3) Choose the lesser cost item.
*Taxpayers should likely not include the direct shareholders of the firm, as these are the ones who knowingly took on risk. Instead, how much would the innocent taxpayers lose due to the collapse? After all, the shareholders took the profits during the good times.
UPDATE: No, not that simple, as it assumes the govt has as much money as needed, when it doesn't. Doh.