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NEW YORK (

TheStreet.com

) --

JPMorgan Chase

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may have outsmarted itself when it chose to let an auction determine the price for warrants the federal government obtained in its banking sector bailout last fall, but it won't be the end of the world.

JPMorgan in June eagerly became one of the first big banks to repay the Treasury Department's preferred equity investment made through the Troubled Asset Relief Program. CEO Jamie Dimon has long maintained that the company had never needed the $25 billion investment, and had only accepted it at the government's insistence that all of the nation's biggest banks stand united so as not to make some appear weaker than others.

Retiring the TARP investment, however, was just the first step in moving out from under government control. Treasury still owns warrants to buy JPMorgan stock, which if exercised, would dilute shareholders.

JPMorgan explored repurchasing the warrants last month, but could not agree on a price with the government. The company ended up on July 7 waiving its right to buy the

warrants

, allowing the Treasury to auction them.

As

The Wall Street Journal

reported on Friday, JPMorgan's gamble in not buying the warrants may not have been a good one. Shares of the company have risen nearly 30% since July 7, meaning that any public auction is likely to determine an even higher price for the warrants now. Shares closed up 2.9% to $43.66 on Friday, above the price the warrants can be exercised.

Contrast JPMorgan with

Goldman Sachs

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, which decided to pay the Treasury what it wanted and be done with TARP restrictions altogether. Goldman, which repaid the warrants last month, said in a release that the $1.1 billion it paid to repurchase warrants represented the "full value" determined by the Treasury.

Other financial companies successfully negotiated a price with the government and bought their warrants back.

American Express

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said at the end of July that it paid the government $340 million to repurchase warrants. The company said that taking into account the dividends and the repayment of warrants -- which totaled $414.4 million -- Treasury earned an annualized 26% return on its investment, reflecting appreciation in shares of the travel and card services company's since the preferred shares were issued in January.

US Bancorp

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, along with several small banks, have also repaid warrants associated with TARP.

JPMorgan, of course, doesn't have to buy the warrants. It may decide the price at auction is too high, and allow another buyer to swoop in if it determines the resulting dilution of its common stock is acceptably low.

JPMorgan Chase spokeswoman Jennifer Zuccarelli declined to further comment on Friday. A message left with representatives of the U.S. Treasury was not returned.

Philip van Doorn contributed to this report

.

--

Written by Laurie Kulikowski in New York.

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