WASHINGTON (AP) — The Treasury Department is selling its financial stakes in bailed-out banks for one-third less than they’re worth, potentially shorting taxpayers up to $2.7 billion, a bipartisan congressional watchdog says.

The estimated shortfall concerns warrants, financial instruments that allow Treasury to buy shares of the firms at a set price in 10 years. If the stock prices of the banks go up, as they are expected to do, taxpayers could reap a healthy profit.

Treasury obtained the warrants when it began injecting billions into the nation’s largest financial institutions in October. They were considered a “deal-sweetener” — a way to help taxpayers benefit from the upside of a financial recovery that depended on billions of federal dollars.

Many large banks received permission to exit the program far earlier than was initially expected. Last month, Treasury announced that 10 of the nation’s largest banks — including JPMorgan Chase & Co., Goldman Sachs and Morgan Stanley — could repay about $68 billion of bailout money.

Twenty-two smaller banks have repaid their bailout money, and 11 of those have repurchased their warrants. If the warrants for those firms “had been sold for their true market values, taxpayers would have recovered $10 million more,” according to a report Friday from the Congressional Oversight Panel, which was created by Congress to oversee the $700 billion bailout fund.

The warrants were sold at a one-third discount over their true prices, according to the panel’s study. If warrants in the more than 600 banks participating in the bailout were sold at such a discount, that would mean taxpayers received $2.7 billion less than the panel estimates the warrants are worth.

Treasury last month announced a method for valuing the warrants through negotiation with the banks. The agency’s offers reflect financial modeling and surveys of market participants.

Treasury disputed the panel’s findings. Treasury spokesman Andrew Williams said the estimates are based on assumptions, so they may be higher or lower than the actual market prices of the warrants. “For that reason Treasury is using a more comprehensive approach to valuing the warrants,” including obtaining quotes from investors who buy and sell similar securities, he wrote in a statement.

Others in the financial industry agreed. Banking consultant Bert Ely said it was reasonable for Treasury to mark down the values of the warrants given that the early repayments put taxpayer dollars at less risk than Treasury had expected when the deals were struck.

Banks have been eager to exit the bailout quickly to avoid the stigma and exempt themselves from restrictions, including limits on executive compensation. Repurchasing the warrants is a necessary step, but has been challenging because of disagreement about the prices.

The oversight panel’s analysis was reviewed by three finance professors from Harvard Business School. The panel is headed by Harvard Law School professor Elizabeth Warren. She was the first to propose a new consumer protection agency for financial products, which has become a cornerstone of the Obama administration’s reform efforts.

One of the group’s Republicans, Texas Rep. Jeb Hensarling, warned against interpreting the report as critical of Treasury’s approach to the warrants.

“It is exceedingly difficult to predict the value of financial securities and time the markets over the short term much less the 10-year term of the TARP warrants,” he wrote.

Treasury has reserved the option to sell the warrants instead of negotiating the prices. The panel said Treasury should consider holding open, public auctions to stop “any speculation about whether Treasury has been too tough or too easy on the banks.”

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