Republicans say the two mortgage giants drove the country into financial crisis. Democrats say it was Wall Street's fault. The potential stakes nothing less than billions in tax dollars, home values and a U.S. Senate seat.
Monday morning, Sen. Barbara Boxer, D-Calif., pointed to the headlines of the financial collapse and told reporters it was the excesses of Wall Street.
"We know this all started because of what happened on Wall Street; it's clear, you can just track it, the whole entire thing," she said.
Boxer says what is needed is a consumer financial protection bureau. She brought along three Bay Area residents to illustrate her point.
One who had his line of credit shut down, another who said he was bilked out of an $80,000 student loan and a consumer advocate dealing with troubled mortgages.
Boxer says a consumer protection agency will protect consumers against Wall Street abuses.
But her rivals in the California Republican Senate debate that aired Sunday night said the financial crisis was much more the governments fault.
"It was entirely due to government distortions of the marketplace, specifically Fannie Mae and Freddie Mac," GOP Senate candidate Chuck DeVore said.
"The failure was when Congress told Fannie Mae and Freddie Mac, and I remember this statement from Barney Frank, 'Roll the dice,'" GOP Senate candidate Tom Campbell said.
"We had 20 plus regulatory agencies that were not doing their job and, as I mentioned, Fannie and Freddie were a huge part of this problem," GOP Senate candidate Carly Fiorina said.
It has become a Republican mantra and Monday Boxer admitted that regulatory agencies did not protect consumers.
"I could say I thought they would do it," she said.
But she added, the Fed was more concerned with controlling inflation and interest rates.
A new consumer agency would only have one mandate.
"From the minute they open up their eyes in the morning to the minute they close them at night, are we treating consumers fairly, this is a good thing for this country we've never really had that," she said.
In the Senate Monday, Republicans pushed for an amendment to sever the government's backing of Fannie and Freddie.
"Sen. McCain's amendment would end the conservatorship within two years and place both companies into receivership if they are not viable," Sen. John Kyle, R-Ariz., said.
Republicans say that could save taxpayers billions in future bailouts.
But the Democratic chair of the banking committee warns if it were to cut the government backing to Fannie and Freddie credit would dry up and housing prices would plummet.
"You can say a lot of things, but if you don't have stability in the housing market this recovery will not occur," Sen. Chris Dodd, D-Conn., said.
The vote on the McCain amendment is expected Tuesday.
