UPDATE 6-CIT bankruptcy fears pummel its bonds and shares

* Analysts suggest bankruptcy is imminent

* Five pct notes due 2014 slump to 53 cents on the dollar

* Shares plummet 75 percent (Adds Moody's downgrade, bondholders conference call, updates prices)

By John Parry and Juan Lagorio

NEW YORK, July 16 (Reuters) - Escalating fears about a potential bankruptcy of embattled U.S. lender CIT Group CIT.N caused its debt to sell off steeply on Thursday and its shares to plummet after it said government bailout talks had ended.

CIT's announcement late Wednesday followed last-ditch talks in which U.S. Treasury officials expressed concern about a worsening liquidity crunch at the 101-year-old company, which lends to hundreds of thousands of small and mid-sized firms.

"With these talks ending fruitlessly, we think CIT likely was too stressed for any temporary government solution," analysts at brokerage Stifel Nicolaus said in a research note.

When asked about CIT, White House spokesman Bill Burton told reporters that President Barack Obama had set high standards for granting aid to companies. "A lot of that had to do with whether or not they could show themselves to be sustainable in the long term," Burton said.

Fitch Ratings, Standard & Poor's and Moody's downgraded CIT's debt ratings deeper into junk territory on the bankruptcy fears.

An asset sale or debt restructuring would provide CIT only temporary relief and bankruptcy was the most likely scenario, analysts at investment bank Sandler O'Neill said.

CNBC television, citing a source close to the finance company, said CIT was pursuing a plan that would likely include a Chapter 11 bankruptcy filing on Friday.

"The prudent course for bondholders is to brace for bankruptcy," wrote analysts at independent research firm CreditSights in a research note.

Shares of CIT, whose problems surfaced two year ago after Chief Executive Jeffrey Peek earlier in the decade engineered a move into the risky areas of subprime mortgages and student loans, swooned 75.2 percent to 41 cents on the New York Stock Exchange.

The company's 5 percent notes due in 2014 fell to about 53 cents on the dollar on Thursday from 61.5 cents late on Wednesday, according to MarketAxess.

CIT's debt troubles briefly weighed on the broad corporate bond market, analysts said. Costs to insure U.S. corporate bonds against the risk of default rose in early trade but then declined to trade near flat on the session.

CIT was not available to comment.