Former NTMA chief: Anglo and Nationwide should have been nationalised

The body charged with borrowing for the State believed Anglo and Irish Nationwide would have been nationalised, rather than guaranteed, in September 2008.

The former director of finance and risk at the National Treasury Management Agency has told the banking inquiry that long before the night of the guarantee, they refused to lend money to INBS because they didn't understand their business model, and had restricted lending to Anglo.

Brendan McDonagh, who now heads up NAMA, said he would have had a simple message that they were "broken institutions" had he been allowed to advise Taoiseach Brian Cowen more on the night of the guarantee.

"It was about 1am when [someone] came out of the room, and said the Government had made a decision to do a blanket guarantee," he said.

"I was flabbergasted, because all the work had been about preparing to nationalise an institution."

McDonagh said that after being called to Government Buildings that night, he had made it clear that Anglo Irish Bank should have been nationalised.

He also said when asked for an urgent response in an email to a proposition of a blanket guarantee on the afternoon of September 26, 2008, he felt it would not be a good idea.

"[It] referred to a possible total funding requirement for approximately €100bn for two insertions … and also a wider guarantee.

"I pointed out that in the event of [a blanket guarantee] the credit agencies would be taken aback at the scale of the state's involvement."

He was giving evidence to the inquiry following two days of testimony from former Taoiseach Brian Cowen.

The committee also heard earlier today from boom-time financier Derek Quinlan, and Cathy Herbert, former special advisor to the late Finance Minister Brian Lenihan.