Gordon Brown has been accused of failing to answer questions on Northern Rock, including why its most profitable part will not be nationalised.
Chancellor Alistair Darling has moved to calm fears about the nationalisation of Northern Rock after it emerged the bank's best assets would stay private.
Tory leader David Cameron said Mr Brown's lack of openness would "make Fidel Castro proud".
Mr Darling said taxpayers would not benefit from the nationalisation of a firm holding £45bn of Northern Rock's most profitable mortgages.
And the Lib Dems threatened to derail the bill nationalising Northern Rock unless the government explained why key assets were staying in private hands.
The Lib Dems and Tories have accused the government of "asset stripping".
Mr Brown insisted the government was acting in taxpayers' interests.
But Mr Darling said Northern Rock was separate from Granite and still had a sound mortgage book of its own.
The government is rushing through emergency legislation to nationalise Northern Rock after efforts to find a private buyer failed.
Northern Rock sold half of its mortgages to a Jersey-based trust, Granite, to fund its expansion, including some of its profitable and high value loans.
But opposition MPs are concerned it has not done enough to protect taxpayers if the bank runs into further trouble.
But the arrangement was suspended when the government stepped in to rescue it - and Mr Darling said it would be up to Ron Sandler, the man appointed to run Northern Rock, to decide whether it should continue.
'Rubbish' assets
There is particular concern about the role of Granite - a Jersey-based trust set up by Northern Rock in 1999 to package up and sell on its best mortgages to investors - which owns about half of the bank's assets.
Ministers have so far completely failed to answer how the continued existence of Granite will be anything other than an asset stripping operation Vince Cable Lib Dem treasury spokesman
Granite contains about £45bn of Northern Rock's most profitable mortgages but it will not be nationalised - leading opposition MPs to claim taxpayers will be left with the "rubbish" in the bank's mortgage book.
Mr Cameron and Lib Dem leader Nick Clegg both raised the issue at prime minister's questions in the Commons.
Mr Clegg said the way the nationalisation had been handled was "jeopardising the interests of the British taxpayers". Mr Brown insisted "stability" was the government's "watchword" - and Granite would "not affect the sale of Northern Rock to a private buyer".
Responding to questions from Mr Cameron, Mr Brown said it was necessary to exempt Northern Rock from freedom of information laws because of commercial confidentiality.
'Student politics'
He claimed the Conservatives had been through six different policies on Northern Rock, with their latest set of proposals amounting to "fire sale" of its assets.
Mr Cameron described the prime minister's answers as "feeble" as several other publicly-owned companies were subject to FoI laws.
He said Mr Brown had failed to say what the total liability to the taxpayer would be over Northern Rock, how long the public would own it and why half of its mortgages would be left in private hands.
Mr Brown accused Mr Cameron of reducing the Northern Rock issue to the level of "student politics" and said the government had acted in the best interests of taxpayers.
'Asset-stripping' claim
'Asset-stripping' claim
Clashes are also expected later in the House of Lords as peers debate the nationalisation of Northern Rock.
Critics - including the Conservative former chancellor Ken Clarke - said that meant with taxpayers would be left with the "rubbish" on Northern Rock's mortgage book, such as unsecured loans.
The Lib Dems are threatening to vote against it, setting up the possibility of the bill 'ping ponging' between the Lords and the Commons as the government battles to get it on the statute book by its deadline of Thursday.
But the Treasury has said Northern Rock "does not sell all its high quality mortgages to Granite; it retains a substantial volume of high quality mortgages on its own balance sheet".
Lib Dem treasury spokesman Vince Cable earlier accused chief secretary to the Treasury Yvette Cooper of not knowing what was happening to the mortgages held by the Granite offshore trust, when she faced MPs on Tuesday night.
Lib Dem Treasury spokesman Vincent Cable earlier wrote to Mr Darling demanding to know why Granite was not being nationalised.
"Ministers have so far completely failed to answer how the continued existence of Granite will be anything other than an asset stripping operation, designed to protect this segment of the bank's activities while the taxpayer is left with unsecured loans and high risk mortgages.
He accused the government of supporting an "asset stripping" operation and threatened to withdraw his party's support for nationalisation - potentially delaying its passage through Parliament.
"The shambolic performance of ministers in Parliament last night (Tuesday) smacks of a Treasury that is out of control.
Mr Darling stressed in reply that Granite was entirely independent of Northern Rock - and the structure of its relationship with the bank was "a common feature for many high street banks and building societies".
"The government must explain how it will ensure that taxpayers will not end up picking up the scraps of Northern Rock from Granite's table."
He said Northern Rock's mortgage book is "of good quality and its assets exceed its liabilities" - and that Granite had no claim on the bank's assets.
Mr Cable has written to Chancellor Alistair Darling to ask why Granite will not be nationalised.
He added: "There would be no public benefit to the taxpayer in seeking to bring Granite into public ownership".
Labour MP John McDonnell has also written to the chancellor to demand an explanation of Granite's role, which he said increased the burden on the taxpayer and put Northern Rock jobs at risk.
'Reckless lending'
'Fully secure'
Peers will debate the nationalisation bill until 2200 GMT and it will return to the Commons on Thursday when MPs will have an hour to put down amendments.
In Tuesday night's debate, former Conservative chancellor Kenneth Clarke said Northern Rock's best assets were in Granite, adding: "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."
The government is hoping it can get the legislation on to the statute book by the end of Thursday.
But in a statement, the Treasury said: "The government has made clear throughout this process that all our loans and guarantees are secured against Northern Rock's assets - not those in Granite - and the FSA has confirmed that Northern Rock's mortgage book is of good quality and fully secure against any government exposure.
Lib Dem peer Lord Newby said his party would now support the nationalisation bill.
"Northern Rock does not sell all its high quality mortgages to Granite; it retains a substantial volume of high quality mortgages on its own balance sheet.
But he said it plans to put down amendments for greater oversight of Northern Rock by MPs and it will back a Conservative amendment to bring it under the scope of the Freedom of Information Act.
"As such it is simply wrong to say that all the high quality mortgages are in Granite."
He also attacked Northern Rock's "reckless" lending practices and urged Mr Sandler to curb them.
Emergency legislation to nationalise the stricken bank was rushed through the Commons in a single day on Tuesday, with the government hoping to get in to the statute books by the end of the week.
The Granite charitable trust was set up by Northern Rock in 1999 to raise cash for Down's Syndrome North East Association.
North-East 'sensitivity'
It does not undertake any charitable activities - a structure the government says is commonly used by banks and building societies around the world.
But Lord Newby asked how much cash had been donated by Granite to the charity and questioned an arrangement in which the name of a charity was "taken in vain".
Former Conservative chancellor Lord Lawson said Northern Rock should be closed to new business and its mortgage book sold off when market conditions improved.
He said the government had chosen to continue running it as a business because it was "sensitive about feelings in the North East", where the bank is based.
'Tax dodge'
Prime Minister Gordon Brown was earlier accused of failing to answer questions on Northern Rock, with Conservative leader David Cameron saying his lack of openness would "make Fidel Castro proud".
In exchanges at prime minister's questions, Lib Dem leader Nick Clegg said the way the nationalisation had been handled was "jeopardising the interests of the British taxpayers".
Mr Brown insisted "stability" was the government's "watchword" - and Granite would "not affect the sale of Northern Rock to a private buyer".
Labour MP John McDonnell has also written to the chancellor to demand an explanation of Granite's role, which he said was a "tax dodge" that increased the burden on the taxpayer and put Northern Rock jobs at risk.
