Monday morning headlines

Markets edge higher: The government's efforts over the weekend to shore up Fannie Mae and Freddie Mac are helping calm Wall Street in early trading. Shares of both mortgage giants are also up.

Krugman's take: In his NYT oped, he says "the storm over these particular lenders is overblown. Fannie and Freddie probably will need a government rescue. But since it’s already clear that that rescue will take place, their problems won’t take down the economy. Furthermore, while Fannie and Freddie are problematic institutions, they aren’t responsible for the mess we’re in."

Is Downey in trouble?: With IndyMac now in the hands of regulators, the obvious question is which bank(s) will be next? Analysts think the mid-sized regional institutions are especially vulnerable - and one name that keeps popping up is Downey Financial, which said Sunday that its nonperforming assets hit 14.33 percent of total assets in May (a year ago it was 1.3 percent). Another bad sign: At last check Downey's stock price was trading at under two bucks a share. Some analysts have been reluctant to name names for fear of more bank runs, though it seems as if several cats are already out of the bag. Here's an explainer from CNBC and below is a clips from the NYT:

Time may be running out for some small and midsize lenders. They vary in size and location, but their common woe is the collapsed real estate market and souring mortgage loans. Most of these banks are far smaller than the industry giants that have drawn so much scrutiny from regulators and investors. Still, only six lenders have failed so far this year, including IndyMac. In 1994, the Federal Deposit Insurance Corporation listed 575 banks that it considered to be troubled. As of this spring, the agency was worried about just 90 banks. That number may go up in August, when the government releases an updated list. “Failed banks are a lagging indicator, not a leading indicator,” said William Isaac, who was chairman of the F.D.I.C. in the early 1980s and is now the chairman of the Secura Group, a finance consulting firm in Virginia. “So you will see more troubled, more failed banks this year.”

Home equity lines frozen: It's not quite business as usual this morning at Pasadena-based IndyMac, now under the ownership of federal regulators. Home equity lines of credit issued by the bank are being frozen, pending a review of each account. They're just making sure that the FDIC's exposure doesn't balloon. (LAT)

Local impact of Busch deal?: It'll take a while for InBev's $52-billion purchase of the U.S. beer giant to be digested, but you have to wonder what it might mean for the company's Van Nuys operations, where 800 workers bottle Budweiser. Keep in mind that U.S. growth has been slow. And check out page 4 of this morning's press release:

The transaction creates significant profitability potential both in terms of revenue enhancement and cost savings. The combination will yield cost synergies of at least $1.5 billion annually by 2011 phased in equally over three years. Given the highly complementary footprint of the two businesses, such synergies will largely be driven by sharing best practices, economies of scale and rationalization of overlapping corporate functions.

Port workers slowing down: The Pacific Maritime Association, which represents terminal operators, stevedores and cargo carriers, claims that L.A. and Long Beach workers started to take their mid-shift breaks simultaneously, rather than staggering them so that work did not stop entirely. The tactic apparently reduced efficiency by between 10 and 15 per cent. “These unilateral actions by the [International Longshore and Warehouse Union] are of heightening concern to us because they are occurring and escalating at a sensitive time during negotiations on a new West Coast waterfront labor agreement,” the PMA said. The contract expired July 1 and the union refused to extend the previous contract. (FT)

Amgen settles with J&J: The Thousand Oaks-based drug maker will pay Johnson & Johnson's Ortho Biotech Products unit $200 million to settle an antitrust lawsuit. Ortho filed suit in 2005, alleging that discounts and incentives offered to oncology clinics buying Amgen's blood-cell-boosting products Aranesp, Neupogen and Neulasta constituted anticompetitive business practices. Amgen denied the allegations, but a spokesman said the company now reviews its contracts in response to market conditions. (WSJ)

E3 show opens in L.A.: As has been the standard theme these past few years, the video game industry's best-known event faces an identity crisis. Microsoft made an appearance, announcing a price cut for its Xbox 360 to $300, but Activision is not here. E3 used to be one of the year's big shows at the Los Angeles Convention Center (the noise was ear-splitting), but after 2006 the E3 organizers decided to scale down the show by moving it to Santa Monica hotels. That didn't work well, so now it's back to the Convention Center. From CNET:

But the industry now finds itself with a growing number of press events, conferences, and conventions throughout the year and around the world, and in the middle of a console cycle. All three major consoles, Microsoft's Xbox 360, Sony's PlayStation 3, and Nintendo's Wii, are more than a year and a half old--and some are questioning whether E3 is still relevant. "I think it's a pretty low-key show now," said Van Baker, an industry research analyst at Gartner who focuses mainly on the console side of the business. "It's more like some of the traditional trade shows (in that) it's all about business...I'm not even going to bother to go. I just don't think I'm going to get anything out of it."

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Yet to observers like Baker, the problem with this year's E3 is that most of the games people are most excited about have been announced for a very long time, and there aren't expected to be many new titles revealed this week that will shake anyone up. "Pretty much all the major title releases have been done already," Baker said. "And barring a brand new title from one of the established publishers...there's just not a lot of news. It's an off year for the platforms, and that combined with the fact that the major publishers (have already announced all their big games), it's tough to find stuff that's that newsworthy."

LAX to Mammoth: Horizon Airlines will offer daily nonstops from L.A. to Mammoth Yosemite Airport from Dec. 18 until April 12, when demand is at its peak. (LAX)