The US Senate has defeated a motion, put forth by liberal Democrats, to invoke cloture on fundamentally-flawed financial reform legislation that would create a permanent bailout authority. Senator Ben Nelson (D-NE), looking to avoid a repeat of the political disaster that followed his vote for government-run health care, joined with Republicans for the vote.

What exactly is wrong with the legislation? The Heritage Foundation explains. For starters, it creates a permanent bailout authority. It would permit the FDIC to “make available … funds for the orderly liquidation of [a] covered financial institution.” Funding would come from new taxes on the private sector.

Secondly, it authorizes federal regulators to guarantee the debt of a solvent bank. So we wouldn’t just be bailout out failed financial institutions. No, any bank regulators determine is at risk of failing would be bailed out courtesy of those new taxes on the private sector.

Third, a new bureaucracy is established with far-ranging powers to limit options for consumers. The “Bureau of Consumer Financial Protection” would limit what financial products and services are to be offered to consumers. Less choice, more government control. Sounds familiar.

Fourth, it’s a pork barrel for trial lawyers — natural constituents of the Democratic Party. The legislation would allow regulators to ban arbitration agreements between consumers and financial firms. The result? Higher costs for consumers and businesses as more money needs to be spent on litigation services.

Finally, the bill does nothing to address the problem of Fannie Mae and Freddie Mac — the two government-backed mortgage giants that left taxpayers on the hook for $125 billion when the housing bubble popped. You’d think serious financial reform would address that problem. And it would. But this isn’t serious financial reform.

Look, we need to reform financial regulation in this country. That was made abundantly clear in this past recession. But you don’t go about doing that by creating permanent bailout funds, expanding the number of bureaucrats, increasing legal costs for businesses and consumers, and ignoring Fannie Mae and Freddie Mac.

Update: Forgot another factor. The legislation’s author is Senator Chris Dodd (D-CT), who had to drop his re-election bid after taking significant heat for his corrupt connections to Countrywide. Democrats have a corrupt senator with sleezy ties to the financial industry writing financial regulation reform legislation.