* Bank says fully supports Treasury Department process

* Oversight panel chair welcomes auction transparency

* JPMorgan shares fall 3.8 percent (Adds State Street bought back warrants, updates shares)

By Elinor Comlay and Jonathan Stempel

NEW YORK, July 10 (Reuters) - JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), seeking to extricate itself from a federal bailout program, wants warrants held by the government to be sold at auction, after the Treasury Department demanded too high a price for the bank to buy them back.

The bank revealed its decision as a Congressional Oversight Panel overseeing the $700 billion Troubled Asset Relief Program said it could could cost taxpayers billions of dollars if the government lets banks repurchase warrants too cheaply. [ID:nN10489123]

Valuing the warrants has become a flashpoint for some of the 10 large banks, including Goldman Sachs Group Inc (GS.N: Quote, Profile, Research) and Morgan Stanley (MS.N: Quote, Profile, Research), that repaid more than $68 billion of TARP funds last month.

The repayments included $25 billion by JPMorgan, whose chief executive, Jamie Dimon, has described participation in TARP as a "scarlet letter" for banks.

"The objective is to get out of the clutches of government," said Marshall Front, chairman of Front Barnett Associates LLC in Chicago. "That is an urgent objective."