WASHINGTON -- One day after the market plunged 500 points, the Federal Reserve decided to leave a key interest rate unchanged. The Dow closed up 141 points.

It was a nerve-racking day on Wall Street, with investors anxious to see how the turmoil in the financial system would play out.

At the opening bell investors were on edge. One day after Lehman Brothers went under, insurance giant AIG was teetering on the brink. The Fed weighed its options and decided to leave a key interest rate unchanged.

“I would view an interest rate cut now like giving somebody chicken soup -- it's not going to do any harm, but not too sure it would do any good,” said Desmond Lachman, with the American Enterprise Institute.

The Fed's decision disappointed some investors but there were hopes the central bank would help AIG stay in business with an infusion of cash.

"The nightmare scenario is that this gets so bad banks totally stop trusting each other. They won't lend to each other even for overnight liquidity reasons and just nobody can get a loan,” said Josh Bivens, with the Economic Policy Institute.

Bivens said we're not there yet and the Treasury Department sought to calm nerves.

“While what's happening is not easy and significant challenges remain, the American people can remain confident in the soundness and resilience of our banking and financial system,” said David McCormick, with the U.S. Treasury Department.

On Capitol Hill, lawmakers weighed in on the issue.

"This did not have to happen, in my view and the warning signs were not heeded to,” said Sen. Christopher Dodd, D-Connecticut.

Congress is considering tough new regulations for investment banks and trying to figure out how to restructure mortgage giants Fannie Mae and Freddie Mac.

On Thursday, the Senate Banking Committee will begin a series of hearings to explore its regulatory options.

This being an election year, few are optimistic that anything will get done on this any time soon.

The Fed's decision to leave rates unchanged came on a day when it moved aggressively to bolster confidence by injecting $70 billion in extra reserves into the financial system.