MAJOR PAPERS:

• The Wall Street Journal reported that worries are deepening among regulators, executives and consumers about the U.S. banking industry following the federal government's seizure of IndyMac Bancorp Inc (NYSE: IMB).
• According to a person familiar with the situation, the Wall Street Journal reported that Banco Santander SA (NYSE: STD) is nearing an agreement to buy Alliance & Leicester for around $2.38B.

• Yahoo! Inc (NASDAQ: YHOO) chairman Roy Bostock called Microsoft Corporation's (NASDAQ: MSFT) proposal "ludicrous". Bostock said that "while this type of erratic and unpredictable behavior is consistent with what we have come to expect from Microsoft, we will not be bludgeoned into a transaction that is not in the best interests of our stockholders." Yahoo reaffirmed that it is open to a sale of the company for $33 a share, the New York Times reported.

• CNet reported that the price of the Xbox 360 Pro model with a 20GB hard drive was cut by Microsoft to $299 from $349. The company also introduced introduced a 60GB model to go on sale in the U.S. and Canada in August for $349.

Late Friday, Microsoft (NASDAQ: MSFT) and Carl Icahn made an offer to the Yahoo! (NASDAQ: YHOO) board. Microsoft would buy Yahoo!'s search business and Icahn would take the rest of the company. Yahoo! was given one day to respond.

The Yahoo! board rejected the offer.

According to Reuters, "This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo!'s stockholders in mind," Yahoo! Chairman Roy Bostock said in the statement.

Smart move. The offer from Microsoft and Icahn looks desperate. Many investors have indicated that they do not want to side with Icahn in his proxy fight against Yahoo!, unless he can guarantee a price at which the company will be bought. These shareholders probably think Icahn cannot operate Yahoo! as an independent company much better than the current management can.

Microsoft needs Yahoo!. Redmond is now a distant third in the search business. If Yahoo! wins the proxy battle, Microsoft will be back with an open wallet.

Douglas A. McIntyre is an editor at 247 wallst.com.

Jerry Yang, Yahoo! (NASDAQ: YHOO)'s CEO, and the company's chairman Roy Bostock sent a letter to shareholders defending the company's actions following the Microsoft (NASDAQ: MSFT) bid. There was nothing to defend. Those owning the web portal company's stock got slaughtered.

"Our board of directors and management made a great effort -- and conducted in-depth negotiations -- to elicit a feasible proposal from Microsoft that made strategic and financial sense for Yahoo, but without success," the executives wrote, according to The Wall Street Journal.

The comments are bogus on the face of it. Microsoft's offer got as high as $33 toward the end of negotiations. Yahoo! now trades at $22. That number almost certainly factors in two things that the market already knows. One is that Yahoo! plans to reorganize management to make the company more efficient. The other is that Google (NASDAQ: GOOG) will sell some of Yahoo!'s search ads, which should make the process more profitable.

Looking back on the entire Yahoo! and Microsoft mess, there is only one thing to remember. Yahoo! traded at $21.94 a week before the offer. It trades near the same price now. The only reason the company was ever worth more is because Microsoft needed it.

And, now that is over.

Douglas A. McIntyre is an editor at 247wallst.com.