WASHINGTON — Rep. Ed Royce's underdog campaign to chair the House Financial Services Committee rests on two primary points: that he has been consistently right on a myriad of financial services issues, and that he could more effectively go toe to toe with Rep. Barney Frank and other Democrats.

The California Republican, who unexpectedly challenged Rep. Spencer Bachus, R-Ala., for the chairmanship the day after the mid-term election, clearly sees himself as a stronger leader at a critical time for his party and the financial services industry.

"The point is that I've gone up against Barney Frank on a whole number of issues whether it was funding for Acorn, GSE reform, some of the moral hazard problems with too big to fail," Royce said in an interview on Thursday. "I believe that when Barney Frank is wrong, we need to forcefully explain the errors in his judgment and then rally our fellow Republicans to enact legislation to address these issues which otherwise can lead to problems such as a bubble in the housing market."

Although Frank is not in the leadership race — he will likely serve as the panel's lead Democrat — the Massachusetts Democrat is still a critical component of the fight. While Bachus is well liked by his Republican colleagues, many privately say he has not been forceful enough against Frank when the Democrat headed the Financial Services Committee.

With Frank likely to maintain an active role on the panel, Royce said he is more than willingly to battle the sharp-witted outgoing chairman and suggests Bachus was too ready to compromise on core issues like reform of the government-sponsored enterprises.

 "I'm quite willing and capable of taking on Barney Frank," he said. "I'll just say that I believe that the willingness to compromise with Barney Frank on the issue of the GSEs in the past has helped create an atmosphere where attempts at reform were blocked."

Royce is also building his case on another platform: that he has been out in front of several critical banking issues and consistently embraced a conservative position. The California Republican was one of the leading lawmakers who criticized Fannie Mae and Freddie Mac, putting forth legislation several years ago that would have allowed their regulator to limit the GSEs' portfolio for systemic risk reasons.

He said he's tired of waiting on the sidelines and wants to be in position to take action so that he can help turn around the economy.

"I have been the leading advocate for GSE reform since I joined the committee," said Royce who came to Congress in 1992 and joined the committee in 1994. "I'm the only member in the House to offer legislation to limit the systemic risk with respect to the GSEs before the crisis occurred and I've been a leading advocate in a number of areas on this committee. Not only in my effort to rein in the GSEs with respect to the arbitrage they were involved in but also with my efforts to eliminate too big to fail and in promoting free market policies."

Royce's challenge is largely considered an uphill climb. The system for picking chairmen typically honors seniority and relationships with leadership.

Bachus is the senior Republican on the committee, and is among the top five fundraisers to help elect Republicans to Congress, giving about $1.8 million for such purposes compared with Royce's $1 million. He has also co-opted other potential challengers by giving plenty of latitude to his subcommittee leaders and has vowed to do the same if he becomes chairman.

So far, Bachus' pitch appears to be paying off. Rep. Randy Neugebauer, R-Tex., the current vice ranking member, is supportive while Rep. Shelley Moore Capito, R-W.Va., the top Republican on the housing subcommittee, said in an interview Thursday she was supporting Bachus and expected him to win.

"I think in the end it will be Rep. Bachus as the chair," she said. "He's showed confidence as being ranking member of the House committee. He's worked hard with our ranking members to hone our message and our legislative techniques and I think he's shown good leadership... I fully expect him to be the next chair and I would support that."

Other prominent committee members, including Rep. Scott Garrett , are also backing Bachus.

Royce's fight is reminiscent of a similar battle four years ago, when Bachus squared off with then Rep. Richard Baker, R-La., to be the ranking member of the Financial Services Committee. Although Baker was the more senior member and a self-declared policy wonk with an expertise in GSEs, Bachus' fundraising prowess and better relationships with his colleagues paid off.

While Bachus has said House leadership and the Steering Committee, which will pick the next chairman, support him, Royce said his conversations with other Republicans have been positive.

"I've been encouraged by a bunch of the members to run for... chairman by both members on the Steering Committee and members of the House Financial Services Committee," he said. "I would never presume to speak for my leadership or any other member — that is for them to do — however I have been very encouraged by my discussions."

Royce said his past positions make it clear why he should be chairman.

"The arguments that I'm going to make are on the basis of policy," he said. "What I will stress are the initiatives that I have authored in the past and the amendments that I've drafted in order to secure safety and soundness in the banking system and the financial system."

Royce rejected the argument that just because Bachus has served as ranking member for four years, he should automatically become chairman.

"It's a different issue who is ranking member than who is going to chair a committee because of the importance of these issues and the reality that there is an expectation that we will lead with the strongest team we can put on the field," Royce said. "The key issue is going to be who is going to be provide the leadership to enact our legislative agenda — that I think is what the debate will be about in the Steering Committee."

If selected as chairman, Royce pledged to work cooperatively with other Republican members to achieve their priorities.

"I think that I can better persuade and lead our Republican members on the committee," he said. "My intention is to be very engaged with every member of the committee, laying out for them the rationale behind what we intend to achieve in the committee and providing them the information, the input and then encouraging them to participate in the debate."