UPDATE 1-State Street buys back warrants for $60 mln-US Treasury

WASHINGTON, July 10 (Reuters) - The U.S. Treasury said on Friday that State Street Corp. (STT.N) paid $60 million to buy back stock warrants, becoming the first of the largest U.S. banks to completely free itself from the government's financial bailout program.

In the latest transaction report from its Troubled Asset Relief Program (TARP), the Treasury also said it reduced auto supplier support programs for General Motors GMGMQ.PK and Chrysler Group LLC by $1.5 billion, as the two automakers emerged from bankruptcy.

The report showed that GM's supplier program was reduced to $2.5 billion from $3.5 billion and Chryslers was cut to $1 billion from $1.5 billion.

State Street was the first of the 10 large banks that recently paid back government preferred share investments to also buy back stock warrants that the Treasury received in exchange for capital injections. State Street paid back $2 billion in government capital.

The warrants were intended to ensure that taxpayers share in the sector's recovery.

But controversy has surrounded the prices of warrants that the Treasury has repurchased from smaller banks. A Congressional Oversight Panel report released earlier on Friday found that the banks underpaid fair market value for these securities by about 66 percent.

The panel's report, however, made no mention of State Street's transaction, which was executed on Wednesday, according to the Treasury. (Reporting by David Lawder)