In 2004 the FBI investigating money laundering were coming across documents about liar loans and its widespread practice by mortgage companies, actually briefed Treasury and SEC about them. The FBI were able to deduce that there were potential financial time bombs as these notes were sold to investors. Since the FBI are not the ones to handle the issue they turned it over to Treasury. Lower level Treasury, SEC and even the Fed Reserve officials were aware and for some unknown reason did not react or take action.
Boom times are seductive. It's easy to entertain the notion that the boom will end, but it's hard to take the hit from ending it immediately, because it could feel good for some time.
But, you'd hope your government would know better.