Just about everyone involved in the current legislative effort to modernize the Federal Home Loan Bank System agrees that the sticking point is a proposal to reallocate part of the bill for the thrift bailout among the 12 district Home Loan banks.

Increasingly, observers are saying that the only way to untangle the mess is simply to drop the new allocation formula for the thrift bailout bond interest out of the legislation. And some observers say Rep. Richard Baker, the bill's sponsor, may do just that.

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