The engineers who built it care mostly about their total compensation and getting promoted. They therefore gleefully implement the product requirements.
The PMs behind the idea also care about the above, except they are held to account by business objectives. By narrowly optimizing for a particular objective (reducing account fraud) in an unprincipled manner, they come up with an insane feature idea like this.
The lowly L3 engineer fresh out of college understands how crazy this is and speaks up, but is hammered down by the culture. The decision is quite literally above their pay grade. They begrudgingly fall in line as they have the most to lose in this situation.
Finally a story like this breaks and upper management realizes the contradiction with the narrative that they're trying to create - that Facebook really does care about your privacy. The whole project gets scrapped, and by the time it's all said and done, over $1M is wasted.