Separation of powers is the concept within democratic government in which powers are distributed amongst different government organs to prevent any one of them from abusing that power. Along with checks-and-balances (the ability and responsibility of each to monitor the activities of the others), separation of powers is intended to reduce opportunities for tyranny.
Federated identity is sometimes criticized for exacerbating the risk of identity theft through its connection of currently separate identity collections into a greater virtual whole. The argument goes something like:
'So, if I login to the identity provider, I can then access my resources at some other service provider? That sounds nice but what happens if my identity at the identity provider is stolen/phished/pharmed/hacked, can't the thief, because of the connection, immediately jump to the service provider and steal my identity there?'
The argument is based on the assumption that some rogue individual, on hacking the identity provider, can get everything they need in order to impersonate me so that they can access my multiple federated service provider accounts.
Here is the rub though. It does the hacker no good to impersonate me, they have to impersonate the identity provider. As they do not know my various service provider credentials, they have to convince the service provider that they are the identity provider asserting to my authentication status. And, the burden of authenticating one site to another site (not to a user as in phishing) is considerably more challenging for a hacker.
If a hacker is to fool a service provider into accepting a counterfeit assertion for me (and thereby assume my identity at that service provider) it needs to present two things:
1) whatever federated identifier had previously been agreed upon between the service provider and the identity provider for myself. Present a random string and the service provider will refuse access because it won't recognize it as one of its federated users. Even if the hacker were to by chance get lucky and pick a valid identifier, its only valid when presented by the corresponding identity provider. see 2) below
2) a signature over the message carrying the above identifier associated with a key trusted by that service provider. Not any key issued by Verisign will do, the service provider will certainly keep a list of 'trusted IDPs' and if the associated key is not on the list then you are not invited to the party.
If the identity provider does things "right", then it will ensure that it is very difficult for any one entity (internal or external) to steal both of the above (it will almost certainly make it difficult to steal either as well). A "good" identity provider will implement "separation of powers" to ensure that, were one of the above was stolen, the other wouldn't be.
You can fool such an IDP once, but likely not twice.
"There's an old saying in Tennessee — I know it's in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can't get fooled again." —President George W. Bush, Nashville, Tenn., Sept. 17, 2002