It was renewed for Season 5 just as Season 4 started airing. As I recall by the time the they sat down to negotiate the details of the budget there had been a change of some of the leadership at HBO and the new mandarins were less enthused by it. Due to The Sopranos coming to an end HBO were throwing money at the development of big budget new shows (such as Game of Thrones, Boardwalk Empire) in the hope of finding a critical and commercial success to replace it as the jewel in the HBO crown. This led to HBO (probably unnecessarily) squeezing the budget for Season 5, leading to fewer episodes and some of the plots feeling (and being) rushed. HBO made a few really bad decisions in the period - see the Deadwood/ John from Cincinatti mess. The fake serial killer and Baltimore sun storylines aren't necessarily any more far fetched than Hamsterdam, what Season 5 doesn't quite have is enough screen time to develop those stories in a way that matches the almost flawless storytelling we saw in previous seasons.