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SAN FRANCISCO/NEW YORK, May 17 (Reuters) – Facebook Inc is set to raise up to $18.4 billion in its IPO and become the first U.S. company to be worth more than $100 billion at its debut, as investors bet on a big pop in the stock when it begins trading on the Nasdaq on Friday.

Frenzied demand, especially from individual investors hoping to buy into an Internet juggernaut that touches hundreds of millions of people every day, is expected to drive Facebook well above its initial public offering price of $38 a share, which was already at the top end of its target of $34 to $38.

Analysts were divided on how high the price might go on the first day of trade, with some expecting a relatively modest gain of 10 percent to 20 percent while others said anything short of a 50 percent jump would be disappointing.

“It will be bananas tomorrow,” said Greencrest Capital analyst Max Wolff. “This is all about the future, so it really
is a lottery ticket.

“The stock could initially rise and then it could go parabolic on a wave of retail investor hope. These shares are
going to trade on hope. I do not know how to value hope,” said Wolff.

Facebook is selling an up to 18 percent stake in the company at a valuation of $104 billion, comparable to the market worth of Amazon.com Inc, and exceeding that of Hewlett-Packard Co and Dell Inc combined.

The highly anticipated offering, the largest by a U.S. Internet company and the second-largest in U.S. history after Visa Inc, vaults the eight-year-old Facebook to the front ranks of corporate America.

It will give 28-year-old Chief Executive Mark Zuckerberg, who started Facebook in his Harvard dorm room, a net worth of
nearly $20 billion.

Enthusiasm for Facebook shares comes despite questions about the company’s long-term money-making capabilities, particularly after it reported a quarter-to-quarter revenue slide in April.

Others warn that the price tag, equivalent to over 100 times historical earnings versus Apple Inc’s 14 times and Google Inc’s 19 times, makes Facebook a risky bet.

“I think they’ll make money – it will just take them a little bit longer because they’re pioneering new ways for advertisers to reach customers,” said Walter Price, a portfolio manager at RCM Capital Management. “It’s not like there’s a simple formula. They have to try different things.”

“It shouldn’t be a surprise to people that the growth rate is going to moderate over the next couple of years,” he said, adding that he expects the stock to trade at around $42 on Friday, which would be an 11 percent gain.

HAVES, AND HAVE-NOTS

Wall Street’s top brokerages fought tooth-and-nail to ensure their wealthiest and most reliable clients got a slice of the IPO. Those with big accounts and a long history as customers likely got first dibs, and would-be buyers who had no such ties were lucky to get any, industry sources said.

A Morgan Stanley Smith Barney adviser based in the northeast said he saw internal figures that showed the firm had more than 60,000 orders for the IPO from 6,600 brokers in over 570 offices – eclipsing a more typical 500 brokers in 300 offices.

The brokerage arm of Morgan Stanley — the lead underwriter on the IPO and therefore expected to get the most shares — initially capped the number each retail client account could receive to 500 shares, which was lower than Bank of America Merrill Lynch’s ceiling of 2,000 shares.

But Morgan Stanley Smith Barney emailed its wealth advisers late on Thursday afternoon to say that it had raised the cap to 5,000 shares, according to sources who spoke on condition of anonymity.

“I am sure they were getting calls,” said Alois Pirker, research director at Aite Group LLC. “One of the advantages of being a lead underwriter is that you get preferential treatment. I am sure there were some wealthy individuals who were wondering if it would be better to be with Merrill Lynch.”

A spokeswoman for Morgan Stanley Smith Barney, a venture with Citigroup Inc, declined to comment.

For most retail investors, their first chance to invest in Facebook, which has some 900 million users, will be on Friday, when they risk getting trampled by institutional funds.

Financial advisers are warning that if the stock skyrockets, the average person might end up getting orders filled at a price much higher than they wanted and then face the possibility of losses as funds steamroll in and then zip back out, taking the price off its highs.

But these warnings are largely falling on deaf ears.

“A lot of retail investors are not concerned about valuation. That’s what is going to drive the first-day pop,” said Jim Krapfel, analyst at Morningstar. “I think anything over 50 percent will be considered a successful offering — anything under that would be underwhelming.”

CHALLENGES REMAIN

Facebook shares will begin trading at around 11 a.m. on Friday, when the well-known brand could attract enough interest to exceed the 458 million shares traded the day General Motors went public after emerging from bankruptcy in 2010.

Facebook will celebrate its Wall Street debut with an all-night “hackathon” at its Menlo Park, California, headquarters starting on Thursday evening, a tradition in which programmers work on side projects that sometimes turn into mainstream offerings.

Zuckerberg, fictionalized in the Oscar-winning 2010 film “The Social Network,” will control roughly 56 percent of the company’s voting shares after the offering.

His majority control has raised flags among some investors, uneasy with ceding so much power to the “hoodie”-wearing
executive who wrote in a letter to potential shareholders that “we don’t build services to make money; we make money to build better services.”

Facebook also faces challenges maintaining its growth momentum. Some investors worry the company has not yet figured out a way to make money from the growing number of users who access Facebook on mobile devices such as tablets and smartphones. Meanwhile, revenue growth from Facebook’s online advertising business, which accounts for the bulk of its revenue, has slowed in recent months.

One UBS adviser initially received calls from 12 clients clamoring to buy shares of Facebook, but over the past couple of weeks, two have changed their minds.

“A lot of people are thrown off by the recent negative stories in the press,” the adviser said, speaking on condition
of anonymity. “One guy was worried about General Motors stopping its advertising on Facebook.”

GM said on Tuesday it would stop placing ads on Facebook, raising questions about whether display ads on the site are as effective as traditional media.

Overall, financial advisers are struggling to manage clients’ expectations about what the stock will do and in some cases, if they will be able to get any stock for them.

This week, Facebook increased the size of its IPO by almost 25 percent to 421 million shares, or a 15 percent stake in the company — a day after hiking its target price range about 14 percent.

If a greenshoe option for underwriters is exercised, as expected, the stake sold increases to 18 percent, raising north
of $18.4 billion. More than half of the proceeds of the IPO will go to existing shareholders, including early backers such as Accel Partners and Russia’s DST Global.

The more bullish had expected Facebook to price at $40 per share. However, the Nasdaq Composite Index fell by more than 2 percent on Thursday, quelling such optimism.

“I expect it to open at a nice premium, but I don’t expect a LinkedIn-type performance because of the sheer size of this IPO,” said Scott Sweet of research firm IPO Boutique.

Shares of professional networking company LinkedIn Corp doubled on their first day of trading.

Lee Simmons, industry specialist at Dun & Bradstreet, forecast a 10 percent to 20 percent gain for Facebook on Friday.

“You’ve got a large offering at an increased price, so a huge pop may be difficult to achieve,” Simmons said. “When you’re talking about doubling or a pop the size of LinkedIn…, the others were smaller floats, under 10 percent, so you had
this artificial feeding frenzy.”

Facebook has 33 underwriters for the IPO, led by Morgan Stanley, JPMorgan and Goldman Sachs.

In an interview Thursday on PBS NewsHour, Jeffrey Brown and Treasury Secretary Tim Geithner had the following exchange:

“JEFFREY BROWN: Do you think Jamie Dimon should be off the board [of the New York Federal Reserve Board]?

TIMOTHY GEITHNER: Well, that’s a question he’ll have to make and the Fed will have to make. But again, on the basic point, which is it is very important, particularly given the damage caused by the crisis, that our system of oversight and safeguards and the enforcement authorities have not just the resources they need, but they are perceived to be above any political influence and have the independence and the ability to make sure these reforms are tough and effective so we protect the American people, again, from a crisis like this. And we’re going to, we’re going to do that.”

In the diplomatic language of Treasury communications, Mr. Geithner just told Jamie Dimon to resign from the New York Fed board (here is the current board composition). It looks bad — and it is bad — to have him on the board of this key part of the Federal Reserve System at a time when his bank is under investigation with regard to its large trading losses and the apparent failure of its risk management system.

Mr. Geithner’s call is a major and perhaps unprecedented development which can go in one of two ways.

If Mr. Dimon resigns, that is a major humiliation and recognition — at the highest levels of government — that even the country’s best connected banker has overstepped his limits. This would be a major victory for democracy and a step towards reopening the debate on financial reform, including introducing more restrictions on what global megabanks can do.

In modern American politics, symbols and substance are hard to disentangle. The big banks have won many rounds, so many times in recent years — including with the help of Mr. Geithner at key moments during the Dodd-Frank debate, in subsequent discussions over capital requirements, and with regard to design and potential implementation of the Volcker Rule (which would limit proprietary trading and other forms of excessive risk taking by big banks). If Mr. Dimon resigns, this could help open the doors to a broader reevaluation of power in the hands of Too Big To Fail banks — and how they undermine the rest of our economy.

If, as seems more likely, Mr. Dimon stays in place, that would be a great victory for the big banks — and a reminder of who is really in charge of the country. Mr. Geithner will be forced to walk back from his statement; that would not exactly inspire confidence in our officials — or help President Obama get re-elected.

Keep in mind that Mr. Dimon himself decided to transform the relevant part of JP Morgan Chase into a risk-taking operation — and it is the people he chose and the systems he put in place that have now blown up.

The entire record of recent interactions between JP Morgan Chase and the New York Federal Reserve will presumably be looked at by investigators — including the total number of meetings, the precise content, and the involvement of Mr. Dimon himself. For example, how often did Mr. Dimon meet with Bill Dudley, president of the New York Fed, over the past 12 months, either one-on-one or in a group meeting? What exactly was discussed? How did any of these interactions filter down into the supervisory process?

We need an independent investigation of the JP Morgan losses — as I argued Thursday morning on NYT.com’s Economix blog. This investigation should examine, among other things, the relationship between Mr. Dimon, his bank, and the New York Fed.

Who will prove more powerful, Jamie Dimon or Tim Geithner?

Simon Johnson is the co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters To You, available from April 3rd. This post is cross-posted from The Baseline Scenario. Read more from the Fiscal Affairs series here.

Facebook announced on Thursday afternoon that it has set the price of its initial public offering.

According to a press release, the company will sell 421,233,615 shares of its common stock at $38 per share.

More to come…

Investors clamor for Facebook’s IPO, a $100B+ invisible suit for its founder and CEO Mark Zuckerberg this week. As one of the first five digital publishers on the Internet, I can say that you might as well put your money in the toilet and flush, unless Facebook reinvents itself a bit.

The Internet is not a level playing field. It’s the ocean. You don’t run it. You pull out a surf board and hope that you catch the right wave before one comes along and sucks you to the bottom. Such has been the case for Internet advertising since the web came to public prominence.

We created the first sports magazine with a cover and magazine layout on the Internet in 2000. MinorLeagueNews.com, which later became MLNSports.com. In the early days of the web, we received big incentives, fat juicy .30 and .40/per click rewards from the pioneering advertising companies for placing ads on our articles.

Then, as Google assumed control of the ad business online, it became .30 per hundred, .30 per thousand, and so on, until you had to have sites with more than a million hits a day, equivalent to four times the readership of most small to medium daily newspapers, to earn more than hen scratch. We were forced to go to subscription to keep our staff of professional writers and photographers paid.

On the reverse side, as an advertiser, the biggest flaw we’ve always found in Internet advertising is the lack of localization.

I see an ad for something I want on page two of the New York Times, and it’s going to be there a day or two later when I drag it out of the recycling bin to find it. Try to go back to the page where you saw an ad, and what do you see? A different ad.

Eyeballs were on it, but the hubris that someone will react to it immediately like a Pavlovian dog simply because you put it out there is one of the great con games of Internet-based advertising. People pay for “impressions” that lack the consistency of location to make a full impression on consumers.

In comes Facebook with a new model. They plop targeted ads down based on what your friends “like.” They also have “pages” where companies can host social networking of their own.

The Facebook IPO is predicated upon the ads, not the pages, because the pages aren’t monetized. The problem, at least for investors, is that the pages drive communication and sales, and Facebook’s ads are a big fat zero.

Take the test that NPR’s Planet Money did with a Facebook ad for local Boston pizzeria Pizza Delicious. Their $240 dollar investment netted a fraction of actual revenue invested, even with the owners working very hard to see how people buying pizza during the advertising period.

By contrast, Pizza Delicious has a “page” on Facebook. 2,374 people have already “liked” it. That means that they see “news” from PD’s page when they put it up. Right now, the restaurant is showing off pictures of the construction of its new digs. It can do more, though.

Facebook is a social medium. You have to do social marketing. If they put up a “name the pizza” contest for some new creation, or asked their fans not only what their favorite pizza is, but to come up with some signature creation of their own that will bear the winner’s name, they will generate social “buzz” that will lead to more sales.

Throw on the occasional coupon available only from the Facebook page, and they can see measurable results because they’re involving people in their pizza universe.

The demographics for the buzz that a Facebook commercial page can generate versus one of their ads can be stark. With 2,300 fans, they can get “buzz” by Facebook metrics at least, of people talking in the tens of thousands. The reach supposedly comes from friends sharing with friends.

In real-world terms, though, our Truth-2-Power.com publication has had days with 12K+ fans talking about us on Facebook, who just don’t apparently leave Facebook. That 12K buzz might only translate to 500 or fewer people who leave the social network’s pages to actually read the article in our ezine that is being referenced on our “fan” page.

So even though Facebook’s commercial pages are a far better advertising medium than their ads, and legions better than Google AdWords, you may still see only a 4 percent actual increase in business brought in to a website outside of Zuckerberg World.

Is that worth the astronomical valuation of Facebook? No. The only thing that can reasonably cover the premium that will likely be paid for IPO shares of the social networking goliath is that somehow, somewhere down-road, the emperor’s clothes will magically appear. They might, though, if Facebook can address one of the great hobgoblins of the great minds that created the commercial Internet: Getting money to the content creators.

Google, Facebook and other big ad players suck up the lion’s share of revenue in the online advertising game. The actual content creators, the artists, bloggers, publishers, musicians, videographers, photographers, etc. see little, if anything, even if they can draw readers/viewers at the rate that commercial newspapers and television stations do in the real world.

Rewarding Facebook for yet another amorphous gathering of Internet humanity that avoids ads like the plague and travels digitally out of the Facebook neighborhood like a shut-in, will not make the shareholders money. Monetizing their share of money gathered for the content creators will.

If Mr. Zuckerberg is true to his word, and still says that his focus is on the social mission, not the bottom line, he can actually help the bottom line, and find the growth for his new shareholders.

Should Facebook take that new-found wealth and buy a WordPress and a SoundCloud and one of the Photo sites, and help content creators get money for their work, an Idea Supermarket, they can make commissions selling that content, and even some ad revenue promoting that content.

What happens inside Facebook stays inside Facebook. Content is king, and it can turn the promise that shareholders are buying this week into currency they can pocket in the weeks and months ahead.

My shiny two.

* White House/Treasury step up talks

* Discussions signal political impact of big loss

WASHINGTON, May 16 (Reuters) – The White House, following a trading loss of more than $2 billion by JPMorgan, wants to ensure a tough interpretation of a regulation aimed at preventing banks from making bets with their own money, The Wall Street Journal reported on Wednesday.

Citing people familiar with the matter, the report said White House officials have stepped up talks with the Treasury Department in the several days since the staggering loss was disclosed by the bank.

The discussions, according to the report, represent the first tangible political impact from the trading debacle. Obama said this week the huge loss illustrated the need for Wall Street reform and warned that the same kind of error at a less stable bank may have required government intervention.

The issue was one of Obama’s signature domestic policy achievements, but he has faced opposition in trying to implement and enforce it.

Treasury Secretary Timothy Geithner said on Tuesday the rules required by the 2010 Dodd-Frank financial oversight law would strengthen the ability of banks to absorb losses like those disclosed by JPMorgan last week.

A key provision of the law, the Volcker rule, bans banks from making speculative bets with firm money, but includes an exemption for trades done to hedge risk.

“It is because of the president that the Volcker rule is a part of the law, and our administration has worked since the day it passed to ensure it and the entire law is implemented in a tough and effective way so that taxpayers never again have to bear the burden of risky behavior on Wall Street,” White House spokeswoman Amy Brundage said when asked about the Journal report.

Regulators are crafting the final language of that rule.

The Dow Jones Industrial Average has been in the red ten of the past 11 trading days. The explanation that seems to summarize the market mood is: the Greek situation.

Far from considering the European situation with complacency or benevolent negligence, there is no rationale in attaching so much importance to Athens.

That Paul Krugman considers that Greece could leave the euro within a month, or Madame Lagarde, the French IMF Director General, openly evokes the possibility of Greece leaving the Eurozone can only fuel a market sentiment that it is actually possible.

The reality is much more simple: if Greece were to leave the eurozone, the speculation would immediately attack another of the European countries and the Euro would quickly disintegrate. Angela Merkel and Francois Hollande have, wisely and explicitly, excluded that option.

Furthermore, the Greek debt would immediately rise by the amount of the loss of value of the Drachma.

It is time to look at the reality.

Greece represents between two and three percent of the Eurozone, and less than 1 percent of the world GDP. Would we consider that the world is collapsing because California (bigger and more important) would be in financial trouble?

The other reason is because there is no correlation between Greece and the United States. The mutual trade is around $1 billion, with $200 million in favor of Greece.

The problem of the Greek debt has been largely resolved with a decrease of $140 billion forgiven by the private sector.

The United States should focus on its own weaknesses.

The reasons for the deterioration of the U.S. equity markets are primarily domestic.
Yes, companies who are very international like GE are suffering from a decline of their European activities, but GE is more Asian than European. The lack of performance of GE does not date from the Greek crisis, but from the departure of Jack Welch.

The banking sector is weakening, spending so much of its time in lobbying Congress that it even manages to fail, as did JP Morgan for $2 billion, to adequately use the loophole obtained to the detriment of the Volcker rule.

Last but not least, we need to remember that the macho culture of derivative products produced losses at Baring brothers, Societe Generale, Goldman Sachs, UBS and JP Morgan. The top management has been unable to clean that business and amply justifies the rule that it should not be used for proprietary reasons.

Greece is a convenient excuse. Let’s correct our own weaknesses, starting from public indebtedness, rather than pointing the finger towards Europe. Our $ 15,000,000,000,000 debt is much more relevant to the world economy and prosperity. We don’t need lessons from Krugman, Summers and other economists to know that Europe cannot survive without a combination of fiscal discipline and growth. When the boat is sinking, it is legitimate to first make sure it can float.

The columns, blogs, tweets and sober cud-chewing over the J.P. Morgan Chase & Co. trading debacle continues. What have we learned? Well, not as much as you’d think, given the notion that the Internet is the greatest investigative reporter since Woodward and Bernstein. We know J.P. Morgan made some complex bets with excess deposits from its London chief investment office unit; we know that it was hedging/betting against a credit default swap index. We know that some bets were bearish and some were bullish (Andrew Ross Sorkin told us that on Monday, trying to simplify), but they weren’t symmetrical, rendering the hedge imperfect. We know at some point that those bets turned bad — hedge funds piled on to bet against the bank — resulting in Jamie Dimon’s Worst Career Moment Ever, probably more embarrassing than his falling out with Sandy Weill’s daughter all those years ago. While heads are ritually rolling, we don’t yet know what Dimon, who is mea culping like crazy, knew or didn’t know, or what would stand up as credible evidence of either. Did CIO Ina Drew gild the lily for him? Was he preoccupied with other matters, like the Volcker Rule? How could he not have known about a position that large and one that was (let us not forget) in newspapers he probably, if angrily, peruses?

The fact that we still don’t know all that much about the trade suggests there’s a transparency problem. How can shareholders value a bank when such large positions are unknown? And what about those regulators? It’s obvious, to say the least, that, as Joe Nocera points out in yesterday’s New York Times, that Drew and her folks were too highly compensated to operate purely as a risk-reducing hedging operation. They clearly were tasked with making money, and given the sheer size of the bank’s excess deposits — another big political problem that Felix Salmon pointed out on Monday — one does wonder if the bank isn’t too large to operate efficiently, that is to manage. But you always come back to Dimon. Every time Dimon is mentioned, so too is the can-rattling meme that he knows risk management better than any other bank chief, and that his skill and foresight allowed him to guide the bank safely through the financial crisis. But do we want a whole banking system that depends upon the perfect judgment of a genius? Dimon, after all, can only run one bank at the time. Is that any way to run a banking system? For years now, Dimon, as a Weill protégé, was known for his operational knowledge and sharp nose for risk. Like Weill (who is little appreciated these days), he was risk-averse. But it wasn’t as if Dimon exactly saw the financial crisis coming — though that’s often implied. It wasn’t as if the bank wouldn’t, under other circumstances, have loaded up with subprime. It was at least partially the case that Dimon spent the years before the crisis slimming Chase down, reorganizing, restructuring and digesting the Bank One acquisition (and J.P. Morgan & Co. before that). He did a fine job at that, but there’s an element of timing as well.

Obviously (since everyone says so), the big trading loss (size still unknown too) revives a) a tougher Volcker Rule, b) talk of reducing the sheer size of the biggest banks, c) renewed interest in higher capital levels and lower leverage. J.P. Morgan has now done more to make the argument for all three than any rambling talking points by politicians, regulators and sainted former regulators. That’s another meme. Alas, politically, that meme ain’t going nowhere in a Congress full of Republicans who take the view that Dodd-Frank is nearly as evil as health care reform and that everything is Obama’s fault. Hell, the GOP would even like to get rid of resolution authority, which may or may not work, but which remains the keystone of Dodd-Frank. Without it, Dodd-Frank is simply a bag of rules — some good, some bad — and new bureaucracy. Without resolution authority, too-big-to-fail will continue to be a cancer on the banking system. Of course, we won’t know if it will work — markets remain skeptical that our human overseers will ever use it — until we try it out on some big bank, though simply tossing it away as an example of excess regulation doesn’t help much.

That said, the renewed “debate” in the aftermath of Jamie’s big loss does suggest how we got to this benighted state. Many pundits, politicians and academics have declared that J.P. Morgan violated the Volcker Rule, even though the rules have yet to be set. Carl Levin on Meet the Press Sunday offered the circular argument that a hedge isn’t a hedge if it results in more, rather than less, risk. In other words, a poorly designed hedge is a speculation. He was willing to quote from the legislation, which he helped co-write. David Gregory moved on, undoubtedly relieved to avoid the ambiguity between hedging and betting.

The fact is, no bank is immune to these problems. No bank chief or uber risk manager is perfect or prescient. That alone should keep the door open to rethinking the size and leverage of the biggest banks. But add to it the reality that the underlying drivers of the financial crisis — at least in banking — remain. We have not removed any complexity from the system; we have not reduced interconnectivity, as worries over Europe suggest (J.P. Morgan’s hedging/bet appears to be deeply intertwined with euro-zone issues). Competition remains intense, and markets are increasingly global. Commodization continues to wring profits out of even complicated products, fueling size and scale. Innovation driven by technology, particularly in derivatives and trading, remains a powerful force. We have not touched the linkage between shareholders, share prices, compensation and risk; in fact, for all the muttering, earnings per share remains the go-to metric in banking. We will not begin to rein in the unleashed potential destruction of risk and leverage until we tackle all those intertwined issues. Writing a few more rules, even the Volcker Rule, won’t cut it.

Speculation, like compensation, remains a symptom, not the underlying problem. We can chop down the size of the big banks, separate “lending” from “casino gambling,” in that far-too-simple a dichotomy. We will have a far safer banking system, though that’s what they said about S&Ls too. But like the S&Ls, we may discover that we have a banking system that is safe but weak; prudent but incapable of driving a large, complex and mature advanced economy; consisting of small, if occasionally dumb, players desperate to make a buck. Compensation will fall, if higher capital outlays depress earnings per share growth to a nice safe, say 8 percent. Even “big” banks will be boring again. But — and there’s always a but — disintermediation, innovation, technology and globalization, with its advantages of scale, will still exist.

Shareholders, who already complain of having too few objects of their affection, will look elsewhere for growth. Sharp finance mavens eager for the big payday will reject the banks and seek the high-octane excitement of non-bank players, or drift overseas; the highly regulated banks will resemble old Ma Bell or the Post Office. Again, perhaps that’s the prudent thing to do now that we know that there are no geniuses.

Everywhere you look, however, there are tortuously difficult tradeoffs. We don’t want to confront them, even when something as messy as this occurs. We want more rules; we want bright lines in a world of shifting sand. We want, in fact, someone in authority — the president, Levin, Volcker, Dimon — to make the sand stop moving. But we don’t really want to look hard at how we got here or how difficult it is to untangle a mess that was a half-century in the making.

Originally published on TheDeal.com
Robert Teitelman is editor in chief of The Deal magazine.

Alan Simpson, the former Republican senator from Wyoming who co-chaired President Barack Obama’s debt commission in 2010, took a swipe at one of his most fervent critics on Tuesday, saying that economist and New York Times columnist Paul Krugman’s work often “borders on hysteria.”

During an interview with Bloomberg TV, Simpson was asked what he thought of Krugman’s argument that more U.S. government spending would help lift the economy.

“Paul Krugman is a great economist, but he ain’t the best in the world,” Simpson said. “I love to read his stuff because it borders on hysteria. He talks about the lost souls of the past, and he is in there, too.”

Krugman, a Nobel Prize winner, accused Simpson of “blood lust” in 2010 for his affinity for spending cuts.

Simpson also commented on debt commission reforms he proposed with co-chairman Erskine Bowles, a Democrat. The initial Simpson-Bowles plan, which proposed for bringing the top tax rate down by repealing a number of tax cuts and credits, was ignored by lawmakers. A bipartisan budget modeled after their report was also rejected by the House this year. Simpson said he remains optimistic about his recommendations.

“It’s like a stink bomb in a garden party, it ain’t going away,” Simpson, who is known for his colorful turns of phrase, said. “Buckle up your guts.”

Simpson also relayed some advice to lawmakers on how to sell his plan to the American public. According to Simpson, it is essential to push the idea of a “shared sacrifice” to get the country out of debt.

“Everybody will get hit,” he said. “If you tell people that and be honest with them, and let them bitch and roar and snort, you can make it through there.”

Look through more of Simpson’s history of colorful statements below:

Alan Simpson, the former Republican senator from Wyoming who co-chaired President Barack Obama’s debt commission in 2010, took a swipe at one of his most fervent critics on Tuesday, saying that economist and New York Times columnist Paul Krugman’s work often “borders on hysteria.”

During an interview with Bloomberg TV, Simpson was asked what he thought of Krugman’s argument that more U.S. government spending would help lift the economy.

“Paul Krugman is a great economist, but he ain’t the best in the world,” Simpson said. “I love to read his stuff because it borders on hysteria. He talks about the lost souls of the past, and he is in there, too.”

Krugman, a Nobel Prize winner, accused Simpson of “blood lust” in 2010 for his affinity for spending cuts.

Simpson also commented on debt commission reforms he proposed with co-chairman Erskine Bowles, a Democrat. The initial Simpson-Bowles plan, which proposed for bringing the top tax rate down by repealing a number of tax cuts and credits, was ignored by lawmakers. A bipartisan budget modeled after their report was also rejected by the House this year. Simpson said he remains optimistic about his recommendations.

“It’s like a stink bomb in a garden party, it ain’t going away,” Simpson, who is known for his colorful turns of phrase, said. “Buckle up your guts.”

Simpson also relayed some advice to lawmakers on how to sell his plan to the American public. According to Simpson, it is essential to push the idea of a “shared sacrifice” to get the country out of debt.

“Everybody will get hit,” he said. “If you tell people that and be honest with them, and let them bitch and roar and snort, you can make it through there.”

Look through more of Simpson’s history of colorful statements below:

SACRAMENTO, Calif. — Facebook’s public stock offering this week is projected to generate between $1.6 billion and $2.1 billion through mid-2013 for California’s budget as shareholders cash in their shares.

The nonpartisan Legislative Analyst’s Office on Tuesday increased the state’s revenue projection after the online social network raised the upper range of its initial stock price from $35 per share to $38.

The higher state revenue projection assumes voter approval of Gov. Jerry Brown’s tax-hike initiative in November.

The analyst’s report says Facebook is expected to drive one-fifth of the growth in California’s personal income this year.

CEO Mark Zuckerberg will make a significant contribution to the state’s finances. Department of Finance spokesman H.D. Palmer says California could receive $195 million when he exercises his option on 60 million shares.