Yes it does. By inflating the underlying prices of consumer assets, it increases their paper wealth. Even if it's a bubble, it still gives consumers more discretionary wealth. Just as we have seen the opposite effect of debt deflation in the last 2 years. Consumer assets have fallen due to a constriction in credit, which has forced deleveraging of consumer balance sheets on a massive scale. This in turn, has wiped out about 12 trillion in household wealth in the last year alone. Just like any asset owned on leverage, you can have huge swings in paper wealth. Of course, this is not the most healthy way to expand an economy, but it does give many more people opportunities to jump the social ladder, than otherwise would be without a credit based economy.
No it doesn't. You are assuming consumers are using 100% of their debt to purchase investment assets. Obviously this is a fallacy.
Unless it has changed the outside investor is in the first loss position (I think shared up to 50/50 with the govt at their option) and the taxpayers are providing cheap leverage. The way it works approximately is for every $100 in assets the investor puts in $10, the govt will match $10 in equity and provides a loan of $80. So a $20 loss wipes out the investor totally and costs the taxpayers $10. Still a good deal but not exactly risk free. From what I remember there is some flexibility about the exact structure - the investor has some choice on the leverage and how much of an equity match to take.