David Drumm was driving the bus. At just 37 years of age, he had been handed the keys. His mentor, Seánie Fitz, had decided to take a back seat as chairman, and had anointed David his successor. The world was now at his feet.

A few months after being appointed CEO of Anglo Irish Bank in 2004, Drumm gave a presentation to investors at a Dublin stockbroking firm. He ran through the practised spiel, throwing out numbers, peppering his presentation with the usual jargon. And then he did something unusual.

In an attempt to illustrate how the bank was expanding, he raised his hands into position as if aiming an imaginary rifle. "We get them in our sights," he said, referring to the bank's clients. He swung his weapon around the room, his trigger finger popping as he hit various imaginary targets, picking off clients, pumping up the bottom line.

The gimmick might have drawn derision if attempted in an environment less cocooned than the financial world. But most people in financial services were in thrall to the bright, shiny Anglo bus. It had blazed a trail through financial services, delivering huge rewards for its investors. If the driver wanted to act like a stupid tough guy, then he was entitled to. Anglo was pure gold.

Last Wednesday, the New York Times asked in a headline 'Can One Bank Bring Down A Country?' We won't know the answer to that question for a while yet, but the trail Anglo Irish Bank blazed through the economy is set to keep burning. The headline was written to mark the publication of results that showed the bank lost €8.2bn in the first half of this year, the worst set of results in European history. Now that the bank is owned by the state, that means every man, woman and child will have to stump up one way or another to cover the losses. Citizens who had never heard of the bank before its collapse will be paying for its sins for the next decade at least.

What is not yet clear is whether or not the bus is stuck in gear, heading towards a steep cliff and dragging the rest of the country with it. How did we get here?

Enter Seán FitzPatrick

Anglo began life as a nice little merchant bank. It was established in 1964 and listed on the Irish stock exchange seven years later. The bank serviced a small clientele drawn from the professions and businesspeople with a few bob to spare. By 1977, it had deposits of £2m and net assets of £100,000.

The following year, it was acquired by a similar operation called the City of Dublin Bank. At the time, it was reported that the Central Bank was "worried about the financial position of Anglo" as it had built up losses over the previous four years of £300,000. Oh, take us back to those innocent days when the authorities had such piffling concerns.

In 1986, the sands had begun to shift. The amalgamated entities were renamed Anglo Irish Banking Corporation, and a new chief executive was appointed. Enter Seán FitzPatrick, a 38-year-old whizz kid, full of ideas and energy. He loaded up the bus with high-energy fuel, and off they went.

Within two years, Anglo Irish was boasting a 50% boost in annual profits. The chairman, Gerry Murphy, heaped praise on FitzPatrick, and proudly pointed out that the oldest senior executive in the bank was just 42. Over the following 12 years the bank's fortunes continued to climb steeply. It was during this time that FitzPatrick brought his talents to bear. While the country came out of recession and the economy began to expand, Fitz moved to exploit markets that were not being properly serviced by the larger banks.

Among the beneficiaries of the gathering boom were professionals, such as doctors, dentists, lawyers and accountants, and business people such as publicans, all of whom were finding that they had plenty of cash to spare. Where better to put it than in a dynamic institution that treated its customers more like friends than clients?

"What these people liked about Anglo was that a relationship was easily built," one banking analyst says. "The bank's credit committee met weekly to approve each loan. That was unusual, but it meant that approval came quickly. They also built up relationships by lending repeatedly to these customers. It was a great niche model and it worked very well. The only problem was it wasn't scalable. That market is only so big, and Anglo was capturing most of it."

Ireland alone was never going to be big enough to accommodate Seánie's dreams. Offices were opened and expanded in Britain and the USA. Anglo was coming to a town near you.

By 2001, the bank had a pre-tax profit of €194m and was increasing its profit levels by up to 50% annually. The financial world was enthralled. Analysts, whose job it is to brief investors on where best to put their money, were falling over themselves.

A report by Davy Stockbrokers in December 2000 referred to "the sheer magnitude of its [Anglo's] growth – for instance, loans have doubled in less than two years".

The report accurately described the model being used: "Anglo's primary market is small to medium-sized businesses, professional practices and individuals. A typical loan in the investment property category would be to a professional to finance the acquisition of a property for rental… its business is very much relationship-driven, ensuring close contact with its customers."

By the turn of the century, however, Anglo was developing a major problem. It had captured most of a niche market. The total loan book at the bank amounted to €11.5bn. The party had to go on. A blazer of trails could not just sit on its laurels. Where to from here?

From hero to zero

One of the more depressing aspects of the Anglo scandal was that it took less than eight years – possibly as few as six – for it to go from hero to zero, and drag the whole country down with it. A first-class scam merchant like Bernie Madoff had to work his butt off for the guts of 25 years to fleece all around him. By comparison, Anglo managed to create a trembling house of cards in jig time.

"They took the model they had with doctors, accountants and publicans and they just applied it to big-time property developers," one analyst says. "There was no real room to greatly expand the number of clients, so the loans had to get bigger. That was where the property developers came in."

Over the next six years, the bank continued to increase the size of its loan book, nearly all of which was shovelled into property. In December 2001, after another set of sparkling results, FitzPatrick assured journalists that the bank wasn't involved in speculative property development. Further inquiries were thus shut out.

A report by Merrill Lynch in October 2003 demonstrated that Anglo remained a golden boy of banking.

"We often find ourselves over-complicating what is in essence a simple equity story," it stated. "Looking forward, we continue to expect volumes at Anglo to proceed at a brisk pace although, granted, not at the astronomical levels witnessed over the past decade as the bank has grown from humble origins."

The report noted that FitzPatrick had recently presented the bank's case at "our European Financial Services conference in London that was attended by over 600 investors over the three days of the event, many of which were seeing the company for the first time". The midas touch was enduring.

Elsewhere, Anglo's competitors were flabbergasted at the success, and equally frustrated. Dermot Gleeson, who was chairman of AIB at the time, later told the MacGill Summer school of the pressures that Anglo's soaring success placed on his bank. "The presence of a competitor who appears to be striding ahead of you, certainly is taking customers from you, certainly is gaining market share and is being lauded and applauded not just by its own supporters but by market analysts."

The authorities were equally dazzled. With a system of light-touch regulation in place – which was not discouraged by the government despite warnings – there were no real efforts to explore the finer detail of this bank of the loaves and fishes.

Out on the stump, Seánie Fitz played it for all it was worth. Using the regard in which he was held both by himself and by the business community, he took up the role of Titan, tilting against the dead hands of regulation and the media. In a speech in September 2005, he explained how he and his like had created paradise for the rest of the population.

"We had ideas and we had balls," he said. "We would put in whatever hours and whatever miles it required to take those ideas and turn them into business successes… and all the time as we worked the scene and maximised the moment, the world watched in astonishment. That is no exaggeration."

He was right about that much. Competitors, investors, the media, all were astonished, and could find no other explanation than that Seánie was a genius. Nobody for a second put him down as an inveterate liar and shyster. Meanwhile, by then he was well into his annual wheeze of sending out his €100m-odd in personal loans for bed and breakfast in Irish Nationwide when the auditors came around.

He continued to dazzle with his balls for the next two years. By 2007, Anglo's loan book was heading for €70bn, seven times what it was at the turn of the century. The bank employed a staff of 1,700. Distant rumbles of thunder could be heard from the US subprime market, but that wasn't going to upset Anglo's apple cart.

In 2007, international rating agency DBRS, commented on the bank's rude health. "We believe that Anglo is well placed to cope with the fundamentally different operating environment which is now emerging, as well as the housing slowdown taking place in key operating markets."

The report listed one of Anglo's strengths as: "A property-securing lender to middle-market companies and professionals, and not a property development lender per se."

Even as the edifice began to shudder, the lies were so easily disseminated. Some weren't buying it any more. Michael Somers, former head of the National Treasury Management Agency, has said he stopped depositing money in Anglo in December 2006. He didn't believe in financial miracles. The pity was that nobody else in the regulatory or state apparatus appears to have shared his concerns.

Another who was in thrall to the miracle was Seán Quinn. He began buying up shares in the bank just as the market took a deep breath. In time, his admiration of Seánie would come to haunt him, and bring an empire built over 30 years to the brink of ruin.

In November 2007, Anglo announced its results for the year to September. Pre-tax profit was up 44% to €1.2bn. The dream lingered.

House of cards

Once the smoke and mirrors of the US subprime market started to become apparent, all sorts of questions began to be asked. One of the elements of the Anglo story had been to ensure that deposits kept some kind of pace with loans. Loans required finance, and there was only so much available on the wholesale market.

"Anglo always said that two-thirds of its funding was from deposits," the analyst says. "When you grow at the pace they did, you have to grow the deposit base and the only way of meeting that demand is sourcing deposits from large corporations and institutions. They have treasury departments which closely monitor banks. Therefore, Anglo was more exposed to a run. If things begin to go wrong, deposits start leaving quite rapidly."

So it came to pass. By the summer of 2008, the share price was scrambling south as the house of cards tilted in the wind, and some depositors were getting seriously nervy. Still, the fairytale persisted.

At an Oireachtas finance committee meeting on 2 July, executive director Willie McAteer reassured everybody that Anglo was rock-solid.

"We have the best interests of the country at heart and are calling it as we see it… we have a strong belief that we have significant and sufficient capital to meet even worse scenarios than we envisage," he said. "I reject the suggestion that banks have been foolhardy in recklessly lending and driving up values [of property]. We are in competition right across the board and I cannot think of a bank that has been reckless."

By then it was all over bar the shouting. Through the summer the deposits left in droves. At the end of September, the perilous state of Anglo was the main reason for the government's issuing of the infamous deposit guarantee. The following Saturday, Seánie went on the radio to thank the taxpayers.

In December, the extent of FitzPatrick's double dealing was exposed and he resigned. Drumm left the same day, and fled to Cape Cod. The bank was nationalised in January, but the whole sorry tale was only just beginning. It's set to run and run, all the way into the next decade and beyond.