The Government had to provide an all encompassing guarantee for banks to counter the effects of a rapidly evolving crisis during the day of 29 September 2008, the head of the Department of Finance has said.
Kevin Cardiff was giving evidence to the Dáil's Public Accounts Committee.
Watch the Committee
After the release of documents last week it emerged the Government had options other than a guarantee.
Among them was nationalising Anglo Irish Bank and Nationwide and offering €20bn in funding to banks.
Today, Mr Cardiff said things were changing quickly on the day of the guarantee.
Instead of going with alternatives proposed by advisors Merrill Lynch, Mr Cardiff said the Government opted for the all encompassing approach to get through the week.
He said banks were collapsing across Europe as share prices fell and Irish banks could not even receive quotes to borrow money.
He said Anglo would not have been able to legally operate on 30 September if the guarantee had not been introduced.
In response to a question from Labour's Roisin Shortall, Mr Cardiff said that, as late as 7pm on the night of the bank guarantee, the Government was still considering steps.
He also said the amount guaranteed, excluding customer deposits already protected, had fallen to around €270bn by the end of March.
Asked about the documents released to the Public Accounts Committee, he said there were no submissions from AIB and Bank of Ireland setting out their stalls.
Mr Cardiff said there was no separate meeting with AIB and BoI on the day the guarantee decision was made.
He said it was the two banks who suggested their meeting with the Taoiseach and the Minister for Finance.
He said officials from the Central Bank, the Finance Department, the Financial Regulator, the Attorney General and others were present.
'No evidence' Anglo was insolvent
He also told the committee that banks' solvency was not the main focus at that time.
Mr Cardiff also said that it was only in the third quarter of 2008 that strong signals of falling property values emerged.
He said there was no information to suggest that this would have progressed to a catastrophic scale.
Mr Cardiff said the Department was satisfied it was receiving a good picture of financial flows, but there was uncertainty about financial strength.
He said there was no evidence that Anglo was insolvent and the bank was regarded as being able to meet funding issues, at that time.
He added that if Financial Regulator Patrick Neary had said there would be a property crisis and a banking crisis coming, the Department would have reacted appropriately.
Mr Cardiff said it was clear there were problems at Anglo, but there was not a picture available at that time that any of the institutions had such difficulties that they would burn through their capital.
He also responded to a question from Labour TD Pat Rabbitte about an upbeat Anglo Irish presentation to the department on 18 September.
Mr Cardiff said while there would have been 'self-deception' among management at Anglo and some other institutions about how much trouble they were in, some of the assessments had been 'dishonest or disingenuous'.
He said Anglo had continued to be over-optimistic for some time after the guarantee, even suggesting that the bank could raise private capital.
Asked whether the Department had been dictating the tone of advice given in economic commentaries by the Central Bank, Mr Cardiff said the system was based on the independence of regulators and that the Department of Finance did not give instructions to the Central Bank on its commentary.
But he said the bank did pass material to the Department for comment and it would comment if it thought any of the information was 'unhelpful or inaccurate'.
The Leader of Fine Gael Enda Kenny said it was now clear that the Government had made a catastrophic decision.
Enda Kenny said Fine Gael was not informed of the doubts that have now been made crystal clear from the Public Accounts Comittee this morning that there were doubts about solvency.
Deputy Kenny said 'I would like to know were there any other financial institutions speaking to the Government directly or indirectly on the run up to the decision made by the Taoiseach and the Minister for Finance in respect of the guarantee.'