It goes on.. third parties weren't the worst and they didn't start it and some are required by law.
Imagine if Credit Card companies were as blatantly incompetent and as reckless as the government? The reason they aren't is because they hold most of the liability at all times, and there's a lot of good laws that set them up for huge damages if the make a mistake. The reason the government doesn't care is because no one holds them accountable.
If you have an interest bearing account, you need to provide an SSN, and even though the regulation has since been changed, you needed it for any account for 30 years or so. Anyways, if my SSN suddenly starts being used 12 states away from where it has been the last few decades, _nobody_ notices. The government is the only agency that could and they just don't.