Greenspan, Shultz argue for quick bailout action

WASHINGTON (Reuters) - Former Federal Reserve Chairman Alan Greenspan and former Treasury Secretary George Shultz urged lawmakers on Friday to move swiftly to agree on a bailout package for financial firms in the interests of the broader economy.

"We urgently advocate immediate, extensive action that would maintain the functions of credit markets and prevent a serious economic contraction," the two elder statesmen of U.S. finance said in a letter published on the Wall Street Journal's website.

They described current conditions as a "crisis" and said the only way that financial institutions could keep functioning was for the government to provide financial support. Democrats and Republicans in Congress are wrangling over a proposal that would provide up to $700 billion to Treasury Secretary Henry Paulson to help buy bad assets from banks.

"Past experience with financial crises shows that overall economic activity contracts soon after the crisis unless swift corrective action alleviates the crisis," they said.

At various times in the 1960s, 1970s and 1980s Shultz served as secretary of labor, treasury and state, while Greenspan chaired the U.S. central bank from 1987 to 2006.