According to that Bloomberg story Zubin just linked to, Goldman is buying back its warrants from the government for $1.1 billion, which turns out to be the price Treasury named, and about 98 percent of what the standard option-pricing models suggest they're worth. (A warrant is the right to buy stock in a company at an agreed-upoin price at some point in the future.)

This turns out to be a pretty good deal for the U.S. taxpayer--and contrasts pretty starkly with JP Morgan's approach to its warrant buy-back, which was basically to tell Treasury to screw off. (The bank considered the government's asking price outrageously high and opted to have the warrants auctioned off to private investors rather than buy them back directly.)

As the Bloomberg piece notes, one obvious motive for Goldman here is PR: Goldman caught a lot of flak for its eye-popping $3.44 billion profit last quarter; it was probably worth a few hundred million to come off looking magnanimous in its dealings with Treasury. Indeed, Goldman CEO Lloyd Blankfein basically telegraphed this thinking in his statement about the bank's TARP repayment:

The 23 percent annualized return to taxpayers “is reflective of the government’s assistance, which benefited the financial system, our firm and our shareholders,” Chief Executive Officer Lloyd Blankfein, 54, said in a statement. “We are grateful for the government efforts.”

But I can't help thinking Goldman has a second motive, which I've alluded to before: Knee-capping the competition. If Goldman pays Treasury's somewhat steep asking price without batting an eye, doesn't that put a lot of pressure on other banks to follow suit? This works out pretty well for Goldman, which can spare an extra couple hundred million without thinking twice. But it creates problems for competitors, who may now starve themselves of capital to keep pace, regardless of whether or not they can afford it.

Obviously no one's crying for Goldman's competitors. And, as a taxpayer, I'm happy to get the extra cash in the short-term. But if the net effect of all of this is to weaken the capital cushion of a lot of other banks, and widen Goldman's relative advantage, I'm not sure it's such a great deal. On the other hand, I'm not sure what the alternative is...

--Noam Scheiber