[lorenzorhoades]

If it was on the BigBank to always prove that their identity was indeed stolen, it would quickly become unmanageable. People would commit fraud in the opposite direction, by getting a huge loan from some a bank and claiming that their identity is stolen. I'm sure it would be easier than stealing someones identity to do it, and it would obviously involve some necessary actions to avoid being caught but this would drive loan rates through the roof for the average citizen to make up for all the fraud occurring. I agree with you ideologically, but in practicality i do not believe it would work.

[caf]

This would obviously drive the BigBank to collect some better evidence that the person applying for the loan is who they say they are, which is exactly the incentives we want here.

[benchaney]

In that case banks would just have to verify who they were giving money to before they start handing out loans. That doesn't sound particularly unmanagable to me.