Goldman Sachs Group Inc may succeed in its bid to pay back U.S. taxpayer money with the help of a $5 billion common share sale, but it may still not get the freedom it wants from intense public scrutiny.

Goldman, which posted a better-than-expected first-quarter profit and announced the public offering on Monday, has navigated the global financial crisis better than many of its rivals.

Its share price has more than doubled since hitting a record low in November, and is up more than 50 percent this year.

So it may be allowed to return the $10 billion it took under the U.S. Treasury Department's $700 billion Troubled Asset Relief Program (TARP), which has become a headache for recipients with oversight over compensation, expenses and acquisitions, experts said.

But given Goldman's size and importance to the financial system, regulators may still want to keep a close eye on it, said Seamus McMahon, an independent banking and regulatory consultant.

So the question is, even if they are allowed to do it, how much of a victory is this actually ultimately? McMahon said. Is it more marketing or does it really give them operating freedom?

The dilemma was underlined on Monday when Goldman posted a profit as it took on more trading risk and disclosed it was paying its employees on average in the quarter almost 35 percent more than in the first quarter of the previous fiscal year.

To add to regulators' headaches, Goldman's bid to return the money could prompt other banks that are not in as good financial condition to seek to do the same, forcing some difficult policy decisions.

Regulators would want to be sure that banks that return the money have enough capital. But they would also be concerned if a two-tier market is created, with Goldman, Wells Fargo & Co and some other banks being seen as strong enough to thrive or survive without government help, and others such as Citigroup Inc seen as requiring government nursing.

Besides Goldman, others such as Morgan Stanley and Bank of America Corp have signaled their eagerness to pay back the money as soon as possible.

It breaks the ice for somebody big to want to pay it back, said Chip MacDonald, a banking partner at law firm Jones Day.

The U.S. Treasury Department did not have an immediate comment.

THROWING THE GAUNTLET

Goldman has managed to sidestep most of the pitfalls of the financial crisis, having posted just one quarterly loss since the middle of 2007, even as competitors posted four or more quarters of losses.

Selling common stock could further strengthen its stake, as it would boost its tangible common equity (TCE), a key focus for investors in determining the strength of banks.

TARP funds did not boost the TCE ratios of banks and so Goldman's offering would be seen as a positive, MacDonald said.

Regulators need to make sure there is adequate capital, MacDonald said. But I don't know why they would resist a redemption if they feel like there is adequate capital.

Still, it would force regulators to make a decision on a tricky subject sooner rather than later.

They are throwing the gloves down, McMahon said, referring to Goldman. In a way it's signaling to the government that they are different from the other institutions.

I can understand what Goldman's rush is. But the government can't be in rush to do that, he added.

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