Developers in Ireland "went too far" during the property boom, according to US ambassador Dan Rooney.
"There were many developments all over the place: houses, buildings, different programs," Mr Rooney said. "We did the same thing on Wall Street. This seems to be human nature. We have to overcome it."
House prices have fallen by about 45 per cent from their peak in 2007. Gross domestic product will shrink about 7.5 per cent this year, and unemployment has risen to more than 12 per cent.
"I knew coming here there was a problem with the economy," he said. "But maybe it was a little deeper than I thought."
Mr Rooney (77), who took up his job in July, described the National Asset Management Agency (Nama), which will take toxic loans off the banks' balance sheets, as a "necessity".
He gave his support to the Government, describing it as "capable", but said the economy still faces "major problems".
He predicted the global economy would struggle next year before recovering, and said the Celtic Tiger decade produced enough positive changes to help Ireland emerge from the recession, he said.
"The US has made the turn," he said, adding that Ireland has "bottomed out, and is beginning to make a little bit of a turn".
On May 4th, US president Barack Obama said he planned to raise about $190 billion during the next 10 years
partly by curtailing the ability of US-based multinationals to write off the costs of overseas units against domestic tax liabilities.
That sparked concern that US companies operating in Ireland including Microsoft and Intel, the largest maker of computer chips, may limit overseas investment.
Rooney said Obama doesn't consider Ireland to be a tax haven and that US companies operating in the country aren't going to be at a "grave disadvantage."
"Are they going to pay more taxes?" he said. "We'll have to wait to see."
Bloomberg