A Democratic plan to rein in the financial industry is flawed because it fails to tighten control over two large government-sponsored mortgage companies blamed for creating a demand for risky loans and inflating the housing bubble, a leading GOP senator on banking issues says.

The legislation "touches nearly every corner of the economy," Alabama Sen. Richard Shelby said in the GOP weekly radio and Internet address. "But these major contributors to the crisis are left unscathed," he added, singling out Fannie Mae and Freddie Mac.

"For years, Democrats blocked meaningful reform of Fannie and Freddie, and not much has changed," Shelby said.

The broadest changes in banking rules since the Great Depression are aimed to prevent a repeat of the near-meltdown that buckled Wall Street in 2008.

The Senate bill would create a council of regulators to oversee risks in the financial system and set up a mechanism to liquidate companies that are too large and interconnected to go through bankruptcy. It also would create an independent consumer protection bureau to police lending and bring previously unregulated complex securities under government oversight.

The Senate is debating the bill. The House passed similar legislation in December.  More from Yahoo here.