The ten banks cleared by regulators to buy back $68 billion in preferred stock investments they sold under the Treasury Department's rescue program aren't quite in the clear yet. They still have to settle on a price to repurchase hundreds of millions of warrants held by the government.

The warrants are important because they give the Treasury the right to buy huge chunks of the banks' common shares. And to be completely free of the additional oversight that comes with taking money from the Troubled Asset Relief Program, or TARP, they must be bought back. But the price tag may be massive -- as much as $5.1 billion, analysts say.
As Bloomberg News reported, that's the upper bound of a valuation of the warrants put together by Credit Suisse analysts. Linus Wilson, a finance professor at the University of Louisiana-Lafayette, estimates the value could be lower, between $3.7 billion and $4.6 billion.

In announcing its move to allow J.P. Morgan Chase (JPM), Goldman Sachs (GS), Morgan Stanley (MS) and seven other big financial companies to repay the bailout funds they received, the Treasury said the firms can now repurchase the warrants "at fair market value." Determining what that is may not be easy.

Some of the smaller banks that have already bought back warrants held by the government have done so at huge discounts, according to Wilson's calculations. On the low end, Old National Bancorp (ONB) paid 21 cents on the dollar to repurchase its warrants, he estimated, while FirstMerit Corp. (FMER) paid 82 cents on the dollar. (For a quick rundown of what goes into valuing a warrant, check out Subsidyscope, a project of the Pew Charitable Trusts.)

Congress clearly wants Treasury to drive a hard bargain. House Financial Services Committee Chairman Barney Frank (D-Mass.) echoed the "fair market value" line in his own press release. But the financial industry is pushing back. J.P. Morgan CEO Jamie Dimon thinks half of banks' warrants should be canceled, and the American Bankers Association called warrant buybacks an "onerous exit fee" from TARP.

But since paying the rate Old National got for all of Treasury's warrants would result in a $10 billion loss for taxpayers, lawmakers may push for a better price.