The Republican party has not achieved many victories in the age of Obama, but one of its few successes was the defeat of the “bankruptcy cramdown” last month. The provision, pushed by Senate majority whip Dick Durbin and endorsed by the White House, would have allowed bankruptcy judges to reduce (“cram down”) principal amounts and/or interest rates for mortgages on owner-occupied homes. Republicans opposed it on the grounds that changing the bankruptcy code and applying the changes retroactively would introduce a high degree of uncertainty into the financial markets; in particular, they feared it would lead banks to raise interest rates on home loans. Twelve Senate Democrats agreed, and Durbin and his allies lacked the votes to enact the change.

On Friday, the New York Times ran a piece by Stephen Labaton attributing the death of the cramdown provision to the strength of the banking lobby. This kind of piece tends to rely heavily on insinuation — the banking lobby made lots of campaign contributions as part of a vigorous effort to sway lawmakers, thus the legislative outcome in favor of the banks must be a quid pro quo. To make this kind of reporting work, it is essential to undermine the lawmakers’ (and the lobbyists’) stated reasons for opposing the legislation. Labaton doesn’t waste any time. In the seventh paragraph, he writes:

Documents and interviews with lawmakers, lobbyists and administration officials show that the banks defeated the bankruptcy change — the industry picturesquely calls it the “cramdown” provision — by claiming that it would push up interest rates and slow the housing market’s recovery, even though academic studies have countered such claims.

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Ah, the academic study — even better than the selectively quoted expert for this kind of work. But not all academic studies are created equal. Labaton cites a 2008 report from Georgetown law professor Adam J. Levitin, but Labaton either ignores or fails to see the report’s substantial weaknesses.

Levitin’s study (co-authored with Ph.D. economics student Joshua Goodman) concludes that “permitting even unlimited bankruptcy modification of mortgages would have no or little impact on mortgage markets.” He bases this conclusion on his survey of past data. But relying too much on past data to make predictions about an unpredictable market is the same mistake Wall Street made during the housing bubble. Specifically, the historical examples Levitin uses are not good proxies for a major retroactive change to the bankruptcy code.

Some background: As it stands, bankruptcy judges are allowed to modify mortgages on vacation homes, investment properties, and the like — just not on owner-occupied primary residences. Congress wrote this provision into the federal bankruptcy code in 1978 in order to encourage banks to offer low interest rates on home loans. The change didn’t become settled law until the Supreme Court ruled on the question in 1993. Up until that point, some state courts had interpreted the law differently and allowed judges to modify mortgages on owner-occupied homes.

The first part of Levitin’s study examines interest rates and mortgage-insurance premiums on single-family primary residences, compared to those on other kinds of residential property. “We would expect that if the mortgage market were sensitive to bankruptcy modification,” he writes, “there would be a risk premium for vacation homes, multifamily homes, and investment property.”

Finding none in the first two cases (and explaining away the third case), Levitin concludes that the mortgage market is not sensitive to bankruptcy-modification risk. But he glosses over an important consideration: At what rate does each kind of borrower default? The following passage is typical of Levitin’s inattention to this question:

It is unsurprising that vacation homes have the same [interest] rates as single-family principal residences. Vacation homes reputedly have lower default rates because typically only well-heeled buyers purchase them.

If mortgages for vacation homes really do have lower default rates than those for principal residences, then it is actually very surprising that they should have the same interest rates. All else being equal, interest rates on principal residences should be higher because, as Levitin notes, only the rich tend to purchase vacation homes. Of course, all else is not equal: Mortgages on principal residences cannot be modified in bankruptcy court, and this factor likely keeps their interest rates down to vacation-home levels.