An academic expert has told the Banking Inquiry that taken together the domestic Irish banks were insolvent in 2008 and giving a blanket guarantee to them was a costly error.
Professor Gregory Connor of Maynooth University said the aggregate balance sheet of the domestic banks was insolvent in 2008 when the government injected €64 billion.
He said the primary cause of the crisis in Ireland was the enormous uncontrolled flow of foreign capital into domestic banks.
This led to unstable debt levels and acted as a Keynesian stimulus by raising income and tax levels.
He said there was also policy and regulatory failures.
Prof Connor said the capital came from a global tidal wave of liquidity, especially German and French banks, which had more deposits than they could profitably use at home.
The net foreign liability rose by 449% between 2003 and 2008 to €158 billion.
Prof Connor said there was also a massive failure by the Central Bank and the Financial Regulator.
He said Anglo and Irish Nationwide's increasingly risky lending pulled in the other banks and shareholders also forced banks into riskier strategies.
He said bank managers who knew they were taking too many risks were to blame.
Sinn Féin's Pearse Doherty asked about previous statements by Prof Connor about Fianna Fáil's "long and clear" links to property developers.
Prof Connor said he was not an expert but this view was clearly stated in books like The Builders and "the Anglo book".
He said he stood over the claim.
He was also asked about his statement that Ireland was the wild west of European finance.
He said the IFSC was a success but it did specialise in light touch regulation which pushed the limits.
He said the German taxpayers had probably borne bigger losses than Irish ones due to losses originated in the IFSC.
Prof Connor said NAMA was now a clear success overall although there were inordinate delays in setting it up which allowed banks to rearrange affairs in ways which were not optimal to the taxpayer.
He said the overpayment for assets worked in the long run and was deliberate in order to avoid forcing all banks into insolvency.
The inquiry has also heard from Professor Eamonn Walsh of UCD about accounting policies.
Asked by Fine Gael deputy Kieran O'Donnell whether audit reports of the banks during the crisis gave a "true and fair" view of their financial position, Prof Walsh said they did in the legal sense.
He said it was fair to say that "true and fair" as understood by accountants was different to how it was understood by the public.
The inquiry has concluded for today.
Meanwhile, it is understood the inquiry is still engaging with the former head of the ECB, Jean-Claude Trichet, regardless of a reported offer from an ECB board member to speak to the committee.
In a letter to MEP Marian Harkin, the current head of the ECB Mario Draghi has indicated that deputy President Vítor Constâncio could informally exchange views with the Inquiry.
While the committee would be happy to hear from Mr Constâncio, it is still working on a legally admissible format where Mr Trichet could answer questions in Dublin outside of the Inquiry.
Central Bank governor Patrick Honohan is liaising with the ECB on behalf of the Inquiry.
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