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Taxpayers 'to get Rock rubbish' Taxpayers 'to get Rock rubbish'
(30 minutes later)
Clashes are expected later in the House of Lords as peers debate the nationalisation of Northern Rock.Clashes are expected later in the House of Lords as peers debate the nationalisation of Northern Rock.
It comes after claims in the Commons the government was only taking over the "rubbish" from the mortgage book.It comes after claims in the Commons the government was only taking over the "rubbish" from the mortgage book.
The part which takes the best mortgages and resells the debt will not be taken into public ownership, MPs were told.The part which takes the best mortgages and resells the debt will not be taken into public ownership, MPs were told.
Lib Dem spokesman Vince Cable said a firm called Granite had been "hived off" from Northern Rock with many of the best mortgage loans.Lib Dem spokesman Vince Cable said a firm called Granite had been "hived off" from Northern Rock with many of the best mortgage loans.
Mr Cable said: "The problem is that Granite is a separate institution which, as I understand it, securitises the best assets of the bank.Mr Cable said: "The problem is that Granite is a separate institution which, as I understand it, securitises the best assets of the bank.
"The best mortgages of the bank are wrapped up in the Granite vehicle.""The best mortgages of the bank are wrapped up in the Granite vehicle."
'Asset-stripping operation''Asset-stripping operation'
He said chief secretary to the Treasury Yvette Cooper appeared not to know what was happening to these mortgages.He said chief secretary to the Treasury Yvette Cooper appeared not to know what was happening to these mortgages.
We now need to have a very rapid and thorough explanation of exactly what's gone on here because this could be stopped in the House of Lords unless there's a proper explanation Vince Cable Lib Dem treasury spokesmanWe now need to have a very rapid and thorough explanation of exactly what's gone on here because this could be stopped in the House of Lords unless there's a proper explanation Vince Cable Lib Dem treasury spokesman
During an emergency Commons debate on the bill to nationalise the bank, Mr Cable said: "What we are now being told is that in some way this has now been hived off to the benefit of a person or persons unknown, apparently, to the minister.During an emergency Commons debate on the bill to nationalise the bank, Mr Cable said: "What we are now being told is that in some way this has now been hived off to the benefit of a person or persons unknown, apparently, to the minister.
"What is going on here appears to be not public ownership of Northern Rock but an asset-stripping operation designed to benefit whoever, we don't know. "What is going on here appears to be not public ownership of Northern Rock but an asset-stripping operation designed to benefit whoever, we don't know. This is a very serious development."
"This is a very serious development."
He said the remainder of Northern Rock's assets, which have been acquired by the government, consisted of unsecured mortgages for up to 125% of the value of a home.He said the remainder of Northern Rock's assets, which have been acquired by the government, consisted of unsecured mortgages for up to 125% of the value of a home.
'Tax avoidance dodge' 'Ping pong threat'
Mr Cable added: "We now need to have a very rapid and thorough explanation of exactly what's gone on here because this could be stopped in the House of Lords unless there's a proper explanation."Mr Cable added: "We now need to have a very rapid and thorough explanation of exactly what's gone on here because this could be stopped in the House of Lords unless there's a proper explanation."
Labour MP John McDonnell said the decision to hive off the best mortgages into a separate company "was motivated by a tax avoidance dodge". The Lib Dems support the nationalisation of Northern Rock but they will call for more time to debate it if the government does not provide a better explanation later when the emergency legislation comes before peers.
But it was the taxpayer and Northern Rock employees, who face job losses, that would lose out, he added. The government could then be faced with the prospect of the bill 'ping ponging' between the Lords and Commons on Thursday - the deadline minister have set for getting it on the statute books.
Conservative MP Philip Dunne said the exclusion of Granite raised "a gaping hole" in the nationalisation programme. Jersey-based Granite, which was set up in 1999, is a securitisation vehicle through which mortgages are parcelled up and sold to investors.
Ms Cooper insisted the government had made the position on Granite clear and taken everything into account. It is thought to hold about £45bn of Northern Rock assets, about 40% of its business, but there are potential legal obstacles to its nationalisation, including the fact that is based offshore.
MPs have also expressed concern that - under Granite's structure - investors could call in their loans if mortgages are not continually replaced by new ones.
Conservative MP Philip Dunne said this left "a gaping hole" in the nationalisation programme, potentially putting taxpayers at a much larger risk than previously claimed.
But Ms Cooper insisted the government had made the position on Granite clear and taken everything into account and that taxpayers would not be made to the foot the bill if it collapsed.
"It is a separate legal entity, it will not be covered by the order - but equally it was not covered by the government guarantees and we have made that clear from the beginning," she said."It is a separate legal entity, it will not be covered by the order - but equally it was not covered by the government guarantees and we have made that clear from the beginning," she said.
'Rubbish assets''Rubbish assets'
But former Conservative chancellor Kenneth Clarke persisted: "The best assets are in Granite.But former Conservative chancellor Kenneth Clarke persisted: "The best assets are in Granite.
"It looks as though there is a contract enabling more assets to be drawn in and it is the rubbish in the assets that we are now nationalising.""It looks as though there is a contract enabling more assets to be drawn in and it is the rubbish in the assets that we are now nationalising."
Emergency legislation to nationalise the stricken bank was rushed through the Commons in a single day on Tuesday.Emergency legislation to nationalise the stricken bank was rushed through the Commons in a single day on Tuesday.
The Banking (Special Provisions) Bill was given a third reading by 293 votes to 167 despite Conservative opposition.The Banking (Special Provisions) Bill was given a third reading by 293 votes to 167 despite Conservative opposition.
The bill now goes to the Lords later, with ministers hoping it can be on the statute books by the end of the week. If passed, the legislation will put the troubled bank into what the government has described as temporary public ownership.
It will put the troubled bank into what the government has described as temporary public ownership.
The bill will spend at least one day in the Lords, before the Commons considers any amendments on Thursday.
The action comes after the bank ran into problems last autumn amid the US sub-prime lending crisis and the global credit squeeze.The action comes after the bank ran into problems last autumn amid the US sub-prime lending crisis and the global credit squeeze.
Ministers opted for public ownership of Northern Rock after rejecting a bid from a consortium led by Sir Richard Branson's Virgin Group and a proposal from the board of Northern Rock.Ministers opted for public ownership of Northern Rock after rejecting a bid from a consortium led by Sir Richard Branson's Virgin Group and a proposal from the board of Northern Rock.