Former taoiseach Brian Cowen has told the banking inquiry that he is happy with the measures he took as minister for finance prior to the banking crisis.

Speaking at a hearing on Thursday afternoon Mr Cowen said there was great ambition, hope and aspiration for where the economy could go at the time.

The former minister for finance and taoiseach said: “When I was there, I am happy we did what we did.”

However, he said with the benefit of hindsight, there were some things they should not have done.

Earlier, he said his administration dealt with the financial crisis to the best of its ability.

Mr Cowen said, as former head of government, he accepts “full and complete responsibility” for what happened.

He said is sorry “for the hardship and stress caused to many people”.

Mr Cowen told the inquiry the bank guarantee was the “most decisive step” the Government could take to deal with the problem.

He said: "We were on our own. We had one shot at it. If we didn't get it right, Ireland would have been set back 25 years.

“We had to go with the best information available at the time.”

Mr Cowen said the Government wanted to burn senior bondholders but were left in “no doubt” that the country could not access a bailout if it pursued this option.

It was “one or the other”, the former taoiseach said.

Mr Cowen also said none of his comments at the inquiry should be read as him trying to “pass the buck to anyone else”.

The former Fianna Fáil leader said the primary responsibility for the crisis lies with the banks.

He criticised the risky lending structure and the bonus culture in the institutions.

Property crash

Asked what he did specifically to stop the property crash, Mr Cowen said he put the brakes on and cut back.

He said it was a case of “this far and no further”.

Mr Cowen said nothing he did “set out to sustain the property bubble” but to ease the bubble back and to allow for the projected soft landing to happen.

He said the international crisis hit and access to lending became even more difficult.

Earlier, under questioning about the former government’s policies, Mr Cowen taoiseach criticised Fine Gael TD Kieran O’Donnell and said Mr O’Donnell did not have a “monopoly” on sympathy.

He said anything he did as minister or taoiseach was in the public’s interest. “If I knew then what I know now... But nobody knew then,” he said.

Mr Cowen also said the Central Bank and the Financial Regulator should have carried out more robust, independent work and scenario planning regarding the banking system.

He said: “There was a lack of analysis by both the Central Bank and Financial Regulator in challenging the over concentration of risk in property.

“The emphasis seemed to have been more on the residential housing market than on the commercial property sector and that was a mistake.”

Mr Cowen said as minister for finance he should have questioned and doubted that position.

The former taoiseach said all international bodies including the International Monetary Fund and the European Union had issued positive outlooks for the Irish economy.

He said: “The advice at the time was that the balance of evidence suggested that the banks had sufficient capital to absorb the likely losses but that there were vulnerabilities and risks. With hindsight this proved to be fundamentally wrong.

“However those were the views expressed at the time.

“We know now that grave mistakes were made in the judgment of the capital adequacy of the Irish banks and the assessment of future loan losses. It is, however, important to note that no one in the independent authorities ever advised the Government that the capital adequacy was not sufficient or that higher capital adequacy ratios should be imposed.”

Contrarian views

Mr Cowen insisted he had no knowledge of any contrarian views with the Department of Finance.

He referenced the papers by Prof Morgan Kelly of UCD and said Mr Kelly’s “pessimistic view” had proven to be accurate.

He said the main stream view was “that house price increases had been underpinned by many factors including a strong economy, increases in employment and earnings, reductions in taxation and lower interest rates resulting from participation in monetary union”.

He added: “Professor Kelly’s more pessimistic view proved to be more accurate as we now know although in his paper he saw the main macroeconomic effect of this as being higher unemployment due to reduced house building activity as prices fell over the period in question.

“He states in the paper that he remained of the view that Irish banks were well capitalised at the time.”

Asked if he had the skills to head up the Department of Finance, Mr Cowen said he was in Cabinet since 1992 and had served in a number of spending departments.

He said: “It is a question of political direction and leadership in the Department.”

Mr Cowen said there was a narrative that the Department of Finance had misjudged the risks.

He said: “I am not here to suggest all is well. Otherwise we wouldn’t be here at all.”

However, he said he was never informed by any independent authorities that problems of the magnitude were coming down the line.

‘Cowboys’

Mr Cowen also said he was being portrayed as a person who supported “cowboys”. The opposite is the case, he said.

Socialist TD Joe Higgins asked if meeting developers at the Galway Tent had influenced his decisions as minister for finance.

Mr Cowen said: “I am my own man”.

He said other parties hold similar events in Punchestown and not a word is said about it.

Mr Cowen said most of Fianna Fail’s funding came from church collections.

He said the party had audited accounts and is there for everyone to see.

Earlier in the hearing, Mr Cowen said he and former Taoiseach Bertie Ahern were "very close".

Asked if measures he took contributed to the property bubble, Mr Cowen said: “I agree the property bubble emerged during my time. That was a result of a number of factors.”

He said he respected the officials at the Department of Finance but the Government was democratically elected.

It made decisions for the people that elected them, he said.

In his opening statement to the committee, Mr Cowen said that contrary to popular belief, he was concerned about the risks associated with the rapid escalation of property prices around the time of the crash.

“It has since been alleged that no action was taken by our Government to deal with these risks,” he said. “This seems to be based on a view in some quarters it seems that I was in some way beholden to property market interests. This is simply not true.”

Mr Cowan is due to speak at a second session this afternoon. It will focus on his time as minister for finance from 2007 until his appointment to taoiseach in 2008; this is scheduled to begin at 2.30pm and end at 6pm.