Bailouts, corporate jets and a fight over government-owned stock warrants.

That might describe the ongoing tussle between banks and federal regulators. It also describes a more heated clash with Chrysler some 26 years ago.

Back then, the Detroit automaker had scurried to repay government-backed loans that had saved it from bankruptcy, but also carried a thick layer of federal oversight.

Afterward, Chrysler's brash chief executive, Lee Iacocca, demanded the government rip up taxpayers' warrants in Chrysler, which the government demanded in the rescue.

"He surprised us all by asking," Paul Volcker, then chairman of the Federal Reserve, which helped supervise Chrysler, told Dow Jones Newswires. "He thought we weren't entitled" to exercise the warrants.

The government sold the warrants at auction anyway, infuriating Iacocca. The winning bidder: Chrysler itself, which paid taxpayers $311 million.

These days, Volcker works at the White House, which is currently in private negotiations with banks to resolve outstanding warrants tied to the recent rescue of the financial system.

Banks including JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) are trying to wash their hands of the close government supervision that came attached to the Treasury's rescue of the financial system. Their outstanding warrants are worth as much as $4.5 billion, according to a recent Dow Jones analysis.

Volcker said he doesn't have current details relating to the bank-warrant talks. But he did explain the rationale behind the warrants, as conceived during the Chrysler bailout.

They were "a way for the government to, in effect, get paid for the risk that it was taking," Volcker said.

There is growing pressure on officials to do just that, and extract maximum profits for taxpayers.

Adding to the subtext is banks' stampede to escape government oversight, which has brought unprecedented levels of scrutiny from regulators and an angry public alike.

And as with Chrylser three decades ago, wrangling over corporate jets has thickened the plot.

In 1983, as Iacocca made rounds on Capitol Hill to urge policymakers to let Chrysler quickly repay its rescue loans, one especially motivating factor surfaced in closed-door discussions: under the rescue, Chrysler was forbidden to purchase a corporate aircraft for Iacocca to use.

Iacocca "was absolutely furious because we forced him to sell Chrysler's Gulfstream" aircraft, said Allan Mendelowitz, who represented the Comptroller General's office in negotiating Chrysler's rescue. Mendelowitz is now a director on the Federal Housing Finance Board.

Iacocca didn't respond to multiple requests for comment. But he addressed his tussle with the government on Monday in an interview with the Associated Press.

"They're on you day and night," Iacocca said. "Their oversight is just too extreme. That's why our 10-year loan, we paid it back in three years. We couldn't stand the government. The bureaucracy kills you."

With his company's loans repaid, Iacocca returned to the skies with a flourish.

"After Chrysler paid off the guaranteed loans, instead of just buying another corporate jet, he had Chrysler go out and buy Gulfstream Aviation - the whole company!" Mendelowitz said.

Late last year, Congress and an angry public berated car-company executives for using corporate aircraft even as their firms cried for government aid.

Mendelowitz said: "If they had bothered to call me, the first thing I would have told them is, 'Don't take your corporate jets when you travel to Washington to ask for a hand-out."

Now it is bankers' turn to argue over warrants. Some have decried them as excessively costly. Jamie Dimon, chief executive of JPMorgan, which said it was forced by regulators to accept a financial bailout alongside other firms, said recently the government should rip up some warrants out of "fairness."

John Allison, chairman of BB&T Corp. (BBT), which likewise says it was stiff-armed into accepting federal funds, in June called the rescue program "a huge rip-off for us."

Mendelowitz doesn't have much tolerance for banks' current frustrations over government stock warrants. He was the government official who first insisted on Chrysler warrants during the rescue talks.

The warrants allowed the government to later purchase shares in Chrysler for $13.00. That meant taxpayers hit the jackpot when Chrysler stock topped $26 in 1983.

-By Marshall Eckblad, Dow Jones Newswires; 201-938-4306; marshall.eckblad@dowjones.com