New-fangled securities were allowing banks to take "highly leveraged positions". It was unclear how these untested inventions would "handle a string of credit blow-ups".
"One simply cannot ignore the number of indicators that are now simultaneously exhibiting marked deviations," concluded the BIS. That was in June 2005.
Regrettably, governments did exactly that. They ignored manifest risks. Real interest rates were held near or below zero in the US and a large arc of Europe until well into 2006.
By then, the damage was done. US housing had succumbed to full-fledged mania. Variants were emerging - later in the cycle - across the Anglo-Saxon world, the Baltic, Club Med, and Eastern Europe.