UPDATE 1-Nasdaq CEO calls on Washington to rediscover compromise

* Greifeld says lawmakers must set aside long-held positions

* Nasdaq head backs revenue increases, spending cuts

* Greifeld part of Fix the Debt Group, met Geithner

* Would be "fine" with higher taxes for the wealthy

* Calls for SEC self-funding, worried about sequestration

WASHINGTON, Nov 19 (Reuters) - Washington needs to

rediscover its ability to compromise and commit to a long-term

plan to reduce the nation's debt, the head of the country's

second-largest stock exchange said on Monday, warning that

lawmakers are flirting with disaster.

Nasdaq OMX CEO Robert Greifeld, in the latest

corporate call for congressional action, said lawmakers need to

think less about "winning."

Instead, he said Republicans must budge on tax increases,

while Democrats must give ground on spending cuts.

"The federal budget must be put on a path to sustainability

that can clearly withstand any changes in the political winds

that may occur in 2014, in 2016, and beyond. This means

additional revenues will need to be raised, including from

businesses, by broadening the tax base, while reducing the top

rates," Greifeld told an audience at the Brookings Institution,

referring to corporate tax rates.

"We also acknowledge that federal spending will need to be

curtailed, including spending on our favorite government-funded

programs."

Greifeld said the best that the markets can hope for in the

short term is for Congress to make a deal to avoid the year-end

"fiscal cliff" and then commit to deliver a longer-term "grand

bargain" on debt reduction during the first half of next year.

Greifeld's speech comes a few days after President Barack

Obama began negotiations with congressional leaders in an effort

to stave off the "fiscal cliff," a combination of spending cuts

and tax increase in early 2013 meant to cut the federal budget

deficit, but that also tip the economy back into recession.

If an agreement cannot be reached, then some $600 billion in

spending cuts and tax increases will kick in starting Dec. 31.

The combination of these two things at once could push the

country back into a recession, analysts say.

The Obama administration is pushing for Republicans to allow

tax rate cuts for the wealthiest Americans to expire as a way to

raise additional revenue.

Republicans, by contrast, want to largely rely on spending

cuts to tame the national debt, while extending the lower tax

rate for everyone.

"Why hasn't the government taken any action? Let's be candid

about this. Putting aside the rhetoric and posturing of the past

two weeks, the behavior in Washington in recent years confirms

that we've lost the ability to compromise," Greifeld said.

On Friday, Obama and top lawmakers agreed to work on a

framework for reforming the U.S. tax code and "entitlement"

programs next year.

Although this longer-term plan would not be enough to avert

the more immediate "fiscal cliff," it is widely seen as an

important step toward achieving a compromise.

'FINE' WITH WEALTHY PAYING MORE TAXES

Greifeld confirmed on Monday that he is a member of the Fix

the Debt campaign, an ad hoc lobby group made up of more than 80

CEOs pushing for long-term deficit reduction.

The group advocates for reforms to entitlement programs such

as Medicare and Medicaid, as well as "pro-growth tax reform"

that would lower rates and raise revenue.

Greifeld told Reuters on the sidelines of the Monday event

that he met last week with Treasury Secretary Timothy Geithner,

who is expected to be a main negotiator for the Obama

administration on the "fiscal cliff."

Greifeld said he came away feeling Geithner was "pragmatic

and data-driven."

"That is a good sign," he said.

He also said during the interview that he would be "fine"

with wealthier Americans paying more in individual taxes as long

as they were properly balanced with spending cuts.

"I think to the extent that the Bush-era tax cuts lapse and

we went back to the rates that were in the Clinton time ... if

that were part of a balanced plan, I would be fine with that,"

he told Reuters.

If those tax cuts expire, the wealthiest would see their

rates spike to 39.6 percent from 35 percent.

Greifeld declined to offer his view on which federal

spending programs should be cut, although he noted there was "no

one program big enough" and the government should be looking at

small steps it can take across the board.

"More likely, you are going to see budget sanity be achieved

by a thousand small steps as opposed to one or two large ones,"

he said.

He would have concerns, however, about extending such

smaller cuts to the U.S. Securities and Exchange Commission -

the federal agency charged with regulating Nasdaq OMX and other

stock exchanges.

The White House's Office of Management and Budget has

projected that, if the sequestration portion of the "fiscal

cliff" takes effect, the SEC would be faced with an 8.2 percent

cut, or $108 million to its $1.3 billion budget.

Greifeld said such a cut could harm the ability of exchanges

to get things done. That is because federal securities laws

require exchanges to seek SEC approval before they change rules

or modify fees.

"Any decline in the SEC's ability to act will hurt our plans

for 2013 and beyond, so that would be a bad outcome for us," he

said.

The SEC's budget currently does not impact the deficit

because the amount appropriated by Congress is offset by fees

the agency charges the industry.

Greifeld believes the SEC "should be a self-funded

organization" similar to other financial regulators such as the

Federal Deposit Insurance Corp.

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