* Aides see Bachus prevailing over rival for chair
* Royce claim could be marker for two years from now
* No final decisions on chairs likely until December (Adds Royce comments from CNBC interview, background)
By Kevin Drawbaugh
WASHINGTON, Nov 4 (Reuters) - Just days after winning control of the U.S. House of Representatives, Republican leaders on Thursday faced an internal fight over the chairmanship of a key committee that oversees Wall Street.
Representative Spencer Bachus was expected to prevail over rival Ed Royce to become the next head of the House Financial Services Committee, aides said, but the struggle could play a role in setting the panel’s agenda for 2011-12.
Royce, from California, announced in a statement late on Wednesday that he was challenging Bachus, the panel’s top Republican and heir-apparent to the chairmanship.
However, Bachus claimed to have the race all but sewn up.
“I’ve spoken to my colleagues on the steering committee and in leadership and I have their overwhelming support and fully expect to serve as the chairman,” the Alabama congressman told Reuters earlier in the day. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
FACTBOX-Top players on U.S. Congress banking committee [ID:nN04293125]
EXCLUSIVE-Next U.S. House banking panel head: liquidate GSEs [ID:nWAT014727]
Republicans ability to reshape Dodd-Frank limited [ID:nN03152036]
Full coverage of the elections aftermath see [ID:nUSVOTE] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The Royce challenge underscores lingering doubts about Bachus, whose leadership has been questioned before by colleagues. After difficult negotiations with Democrats over the 2008 bank bailouts, Bachus had to beat back an attempt to oust him as ranking minority member of the committee.
He prevailed then, however, with the support of John Boehner, due to become speaker of the House -- the top post in the chamber -- in the next Congress. Aides said the Boehner-Bachus connection is still strong.
If he becomes chairman, Bachus will have to step aside in two years under party term limit rules. The challenge being made now by Royce may actually be his way of laying claim to the chairmanship in 2012, some aides said.
Royce told CNBC television late on Thursday that his challenge was real and not intended to put down a marker for 2012. “I’ve been encouraged by my colleagues,” he said.
The committee, with more than 70 members, is one of the largest in Congress. Banks, insurers and other deep-pocketed financial firms regularly pour money into the campaign coffers of the panel’s members.
Boehner and other top Republicans will determine who gets the head posts at financial services and other committees.
“Those decisions will be made by the steering committee at the appropriate time,” Boehner spokesman Kevin Smith said.
Decisions will not be made for a few more weeks. Congress is in recess until the week of Nov. 15. House Republicans will hold leadership elections that week. Appointments to chairmanships will not start until December, aides said.
Democratic Representative Barney Frank, the current head of the committee, won reelection on Tuesday, but with the control of the House changing hands, he looses his chairmanship.
Either Bachus or Royce would represent a dramatic change from Frank, with Republicans vowing to attack landmark banking reforms pushed through earlier this year by Democrats.
Bachus sent a letter to top U.S. regulators on Wednesday raising basic questions about a key provision of the reforms meant to curb risky trading by banks, offering an early sign of how he might handle the chairmanship. [ID:nN04147413]
Both Bachus and Royce want to reform the broken U.S. housing finance market and the mortgage giants at the center of it -- Fannie Mae FNMA.OB and Freddie Mac FMCC.OB, which are known as government-sponsored enterprises, or GSEs.
Bachus said on Wednesday that the GSEs should be liquidated and government removed as much as possible from the housing market. Analysts doubt a major reform will occur before 2012.
Royce has long been an advocate of giving insurance companies the option of answering to a federal regulator. If he were named chairman, he would likely move this controversial issue up the committee’s list of priorities, aides said.
While Royce is among the most senior members of the committee, he is not in line to take over any of the panel’s six subcommittees.
For Republicans, seniority is one of a number of factors considered in choosing committee chairmen. Representatives Jeb Hensarling and Scott Garrett, though well down the seniority list, have also been seen as potential rivals to Bachus.
Hensarling, meanwhile, has announced he wants to be Republican Conference chairman -- a top leadership post -- and he has wide support.
Editing by Philip Barbara