In evidence to the banking inquiry that runs contrary to testimony given by other senior members of the previous FF-Green administration, the ex-environment minister said it was not just concerns over corporate governance at the institution that led the government to act.
Mr Gormley said he could not give a precise date for when he became aware of the insolvency issue at the bank, but it was discussed around that time.
If the then Fianna Fáil-Green administration was aware of the insolvency issues surrounding the toxic bank, it would have knowingly exposed the State to far more liabilities than has previously been revealed.
The ex-Green leader says he believes bankers were lying to the government in the run-up to the infamous September 2008 blanket bank guarantee, but he had no evidence for this.
Also giving evidence to the inquiry was former PD tánaiste Mary Harney, who said mistakes had been made by the governments she served in.
The former cabinet minister cited the prevalence of 100% mortgages and light regulation in the financial sector as causes of regret.
Ms Harney said she and other ministers had shown undue confidence in the regulatory system in place.
However, Ms Harney insisted a lot had been achieved in the areas of employment and social care while the PDs were in power with Fianna Fáil.
The ex-tánaiste also defended her stint as enterprise minister, and reforms of the banking sector and tax reductions carried out by the government of the day.
Mr Gormley stood over the notorious bank guarantee decision of September 2008 as he insisted it was the least worst option available.
The former minister defended his controversial decision not to attend the pivotal early hours’ meeting with then taoiseach Brian Cowen and finance minister Brian Lenihan which decided on the move.
Mr Gormley said his presence would have made no difference to the outcome.
The ex-Green leader also stated that nearly all the mistakes that led to the crash and the guarantee, had been made prior to when his party entered government in 2007.
Mr Gormley said he became aware Anglo was insolvent when fellow Green cabinet minister Eamon Ryan, who was dealing with the banking issue for the party, informed him about it.
The former green leader urged the committee to call in Mr Ryan, who is current party leader, as he said his ex-colleague dealt with the banking issue as he had “more time on his hands” than Mr Gormley.
Ms Harney also said that nationalisation of Anglo was the only option. The former tánaiste could not say exactly when she became aware of the insolvency issue at the bank.
Ms Harney denied the bank guarantee was a huge bluff which then backfired.
Mr Gormley defended the decision to enter the bailout with the troika in November 2010.
The former minister said it was wrong to say that the government had “caved into” foreign pressure without a fight.
Mr Gormely said that the cabinet had the “political smarts” to understand that Ireland was too weak to withstand such pressure.
The former minister said it was wrong to believe the Greens did not know what was going on when they were in government with Fianna Fáil.