Instant View: Key points and reaction

NEW YORK (Reuters) - The U.S. Treasury Department and Federal Reserve on Sunday announced sweeping measures to lend money and buy stocks if necessary in embattled mortgage lenders Fannie Mae and Freddie Mac.

KEY POINTS: * "(Their) continued strength is important to maintaining confidence and stability in our financial system and our financial markets. Therefore, we must take steps to address the current situation as we move to a stronger regulatory structure," Treasury Secretary Henry Paulson said in a statement. * Paulson says U.S. Treasury to temporarily increase line of credit for Freddie Mac, Fannie Mae * Treasury to have temporary authority to buy equity in either firm if needed * Fed authorizes Fannie Mae, Freddie Mac to borrow at its discount window rate if necessary * Treasury official: GSE liquidity, equity backstops need Congress approval, could be done by end of week

COMMENTS:

MICHAEL KASTNER, HEAD OF TAXABLE FIXED INCOME, STERLING STAMOS

CAPITAL MANAGEMENT, NEW YORK:

"It's kind of like what we would have liked to see on Friday. The Treasury and the Fed drew a line in the sand. It gave them (Fed, Treasury) the most flexibility, but tells the market that they are on the case... That if the situation deteriorates to the extent of Bear Stearns, it can come to that. It's a win win situation for shareholders and the managements of Fannie and Freddie. My best guess is equities trade up, and bonds (Treasuries) a little weaker. MBS a little better."

SEN. CHARLES SCHUMER, DEMOCRAT OF NEW YORK; CHAIR OF CONGRESS'

JOINT ECONOMIC COMMITTEE:

"While Fannie and Freddie still have solid fundamentals, it will be reassuring to investors, bondholders and mortgage-holders that the federal government will be behind these agencies should it be needed. The Treasury's plan is surgical and carefully thought out and will maximize confidence in Fannie and Freddie while minimizing potential costs to U.S. taxpayers."

JOE KINAHAN, CHIEF DERIVATIVES STRATEGIST, ONLINE BROKERAGE

THINKORSWIM INC, CHICAGO:

"This is very bullish news as the government is basically saying that they will prop up both Fannie and Freddie, giving confidence to the mortgage industry.

"September stock index futures are already trading higher on Sunday evening based on this news. I think they will hold onto these gains barring any news overnight.

"It will be interesting to see how the stock market reacts once all the stock index futures, commodities and options are all fully trading on Monday morning."

JOSH ROSNER, MANAGING DIRECTOR, GRAHAM FISHER, NEW YORK:

"It's outrageous. It's offensive. Welcome to the socialist state. In capitalism, winners are supposed to reap rewards and losers are supposed to take losses for bad risk management. These are private companies."