The once-cordial relationship between House Oversight and Government Reform Chairman Edolphus Towns (D-N.Y.) and ranking member Darrell Issa (R-Calif.) is quickly turning sour in an escalating spat over failed mortgage giant Countrywide’s controversial loans to public officials.

Towns is accusing Issa of falsely claiming he had the chairman’s approval for a demand that Sen. Kent Conrad (D-N.D.) appear before Republican committee staffers to discuss his involvement in the program — a charge Issa denies.

Towns made the claim in a scathing letter he sent Oversight panel members on Wednesday that also accused Issa of “making misleading and partisan attacks— in pursuit of an investigation he called a waste of the committee’s time. “Although I hesitate to write this letter that will raise the profile of this particular partisan distraction, I believe it is important that the Committee Members are aware of the complete story,— Towns wrote.

The Brooklyn Democrat charged Issa staffers with conducting an “unofficial— interview with former Countrywide official Robert Feinberg without majority staff present, then presenting excerpts out of context “as an official finding of this Committee investigating members of the other body.— And, Towns continued in the letter, Issa accused former Fannie Mae CEO Franklin Raines of perjuring himself before the panel, a claim that Towns found to be “entirely without basis.—

Issa spokesman Kurt Bardella said Towns’ charges were groundless. “We are really surprised they put something out so carelessly that is riddled with statements that aren’t true,— he said.

Issa’s staff on Thursday compiled a memo to punch back at the Towns letter, charge by charge. The memo argues that Issa never demanded that Conrad or Sen. Chris Dodd (D-Conn.) — who also received a loan through Countrywide’s VIP unit — appear before the panel. Rather, he invited both to share their experiences with the program, noting they were not targets of an investigation. The memo says the majority staff chose not to participate in the Feinberg interview, and the excerpts from it were never presented as official committee findings.

And, it went on, there was sufficient evidence that Raines perjured himself to merit a Justice Department referral after he testified in December about a VIP loan he received.

The back-and-forth came after Issa laced into Towns at a committee hearing Wednesday, demanding that Towns issue a subpoena for records related to the Countrywide loan scandal or “step aside— and allow the committee to vote on whether to do so.

Issa wants the panel to force Bank of America, which bought Countrywide last year, to fork over more information about the program, including recordings of phone conversations with borrowers that have reportedly been destroyed. At the Wednesday hearing, he said mixed in with records of the 28,000 loans issued through the program are “vital documents— about “hundreds or thousands of loans to government officials throughout the country, from the top to the bottom, from Republican to Democrat to independent, who were clearly given what amounts to a bribe of government.—

Conrad and Dodd both denied wrongdoing for participating in the program and said they never asked for favorable terms on their loans. The Senate Ethics Committee in August dismissed complaints against the pair while chastising them for failing to use “more vigilance— to ensure against the appearance of special treatment. The Wall Street Journal in August reported that Towns received two mortgages from Countrywide that were processed through the VIP program — a fact that Towns’ staff has said had no bearing on his decisions in the investigation but that Issa has suggested presents a conflict of interest.

Towns, in his letter, said Issa’s push for the records was putting at risk sensitive, personal financial information of participants in the VIP program, a majority of whom he said had no links to government or Wall Street. Issa’s staff, in their memo, countered that the ranking member never specifically requested such information and has made clear he is willing to work with Towns to narrow the scope of the subpoena.

The squabble marks a sharp turn in what had been, at least outwardly, a congenial working relationship between Towns and Issa, who assumed the top slots on the Oversight panel at the start of this Congress. They appeared to coordinate closely in June, for example, in a probe of the Bush administration’s involvement in Bank of America’s acquisition of Merrill Lynch last year.