* Goldman Sachs, Morgan Stanley to each repay $10 billion

* Goldman CEO has "regret" over bank's role in euphoria

* TARP refund expected on Wednesday (Updates with letter from Goldman CEO Blankfein, background byline)

By Steve Eder

NEW YORK, June 16 (Reuters) - On the eve of Goldman Sachs Group Inc (GS.N: Quote, Profile, Research) paying back $10 billion of government bailout money, Chief Executive Lloyd Blankfein expressed "regret" his bank took part in the "market euphoria" that led to the collapse of the financial sector last year.

Goldman Sachs and Morgan Stanley (MS.N: Quote, Profile, Research) are expected to be in the first wave of major banks that will begin repaying the money taken from the Treasury Department's Troubled Asset Relief Program, known as TARP. Morgan Stanley also took $10 billion.

Blankfein, in letters to lawmakers, said Goldman is scheduled to repay its loans on Wednesday. A source familiar with the situation said Morgan Stanley would do the same.

Both firms confirmed last week they were among 10 major banks that would be allowed to repay TARP funds.

"While we regret that we participated in the market euphoria and failed to raise a reasonable voice, we are proud of the way our firm managed the risk it assumed on behalf of our clients before and during the financial crisis," Blankfein wrote in letters on Tuesday to Sens. Christopher Dodd and Richard Shelby, and Reps. Barney Frank and Spencer Bachus.