PRESS DIGEST - Wall Street Journal - May 20

May 20 (Reuters) - The following were the top stories in The Wall Street Journal on Tuesday. Reuters has not verified these stories and does not vouch for their accuracy.

* Microsoft Corp (MSFT.O) floated a proposal to acquire Yahoo Inc's (YHOO.O) search-ad business, a plan met with lukewarm reaction from Yahoo executives. The move is viewed as an effort to pressure Yahoo against pursuing a separate ad deal with Google Inc (GOOG.O).

* The slump in auto sales is already complicating the turnaround efforts of the Big Three, which spent the last decade pushing sales volumes to artificial peaks. Now, as demand drops back to 1990s levels, the industry's miscalculations may have broader economic consequences.

* A Citigroup Inc (C.N) hedge fund has caused steep losses for at least three large U.S. banks. The losses may pressure Citigroup to return some of the money. One of the banks, Fifth Third Bancorp (FITB.O), is suing firms that arranged the investment.

* A U.S. Senate agreement pushed Congress significantly closer toward a bill that would expand the federal government's role in propping up the housing market. After weeks of negotiations, Senator Chris Dodd, a Democrat, and Republican Senator Richard Shelby completed a plan that would allow the government to insure up to $300 billion in refinanced loans for struggling homeowners.

* A federal judge said in a recent ruling that at a trial earlier this year the government had presented "sufficient evidence" for a jury to conclude that a conspiracy to fraudulently boost the financials of American International Group Inc (AIG.N) started with a phone call by former Chief Executive Maurice R. "Hank" Greenberg.

* The U.S. Supreme Court preserved the widespread practice of offering tax breaks to local residents on state municipal bonds, a ruling that came as a relief to the $2.6 trillion bond market.

* The U.S. government raised its one-month-old forecast of how much food prices will rise in 2008 by half a percentage point to a range of 4.5 percent to 5.5 percent.

* Questions on staffers' ties to lobbying continued to dog Senator John McCain's campaign as aides to the Republican presidential candidate sought to contain political damage from the widening controversy.

* Edison International's (EIX.N) deregulated power-sales units agreed to pay $7 million in penalties and create a $2 million compliance program to settle accusations the units took federal energy investigators on a wild goose chase, violating a "duty of candor."

* Breaking a long silence, Robert Maguire III said that he realized weeks ago that he likely would have to step down as chairman and chief executive of Maguire Properties Inc (MPG.N), the real-estate company he founded, if he was going to continue his efforts to take it private.

* German media giant Bertelsmann AG [BERT.UL] has tapped the head of its printing unit, Markus Dohle, to head its Random House unit, a move that could shake up the big and influential book-publishing business, says a person familiar with the situation.