If CIT Group exchanges its debt under an offer aimed at averting a bankruptcy filing, the U.S. government could lose nearly 80 percent of its $2.33 billion investment in the troubled commercial lender.

A likely $1.8 billion loss would be another black eye for the United States' Troubled Asset Relief Program. A government official said last week that TARP has saved the financial system from collapse, but fell short of some of its other goals.

Some parts of the program may lose money, added the official, Neil Barofsky, special inspector general for the government's TARP program.

The U.S. government bought $2.33 billion of CIT preferred shares in December 2008 as part of the TARP program. In July, CIT sought additional government support, but those talks broke down and the company was forced to work out its funding issues on its own.

Under the exchange offer, investors in preferred shares and securities that get exchanged into preferred shares will end up with 97.5 percent of CIT's shares, which should equal about 15.7 billion shares. That means that the total number of outstanding CIT shares should be about 16.1 billion.

If the government is ending up with 2.4 percent of CIT's equity, as the exchange offer says, the United States would end up with about 386.4 million shares. At current prices, that would be worth about $490 million, or about $1.84 billion less than its value in December.

To be sure, it is not clear how much common shares in CIT will ultimately be worth. Any valuation at this point may be very different from what the government eventually gets back -- taxpayers could end up with more than $490 million, or less.

Other government investments may also generate losses, Barofksy said in Senate testimony last week. For assistance to American International Group Inc and the automakers, full recovery is far from certain, he added.

A spokesman for the U.S. Department of Treasury was not immediately available for comment.

(Reporting by Dan Wilchins, editing by Matthew Lewis)