I'm not sure what you mean by putting families at risk?
Incompetent people put their own families at risk by trying to work in an industry where they're incompetent. It's not the responsibility of employers in that industry to provide for the families of people who can't do the job. It's really a bizarre concern to be worried about the families of fakers. Moreover, how would it be better for the family of a fake for companies to not hire them at all, as opposed to hiring and inevitably firing them? In either case they'll be unemployed ultimately, but at least if they get hired and fired they can pick up some paychecks, so that's actually better for their families, if that's what we care about here.
(1) Competent programmer who isn't a good fit for a particular job.
(2) Incompetent programmer, the "can't code, can't even write a for loop" bogeyman that seems to scare everyone.
Coding interviews — whiteboarding, take-home projects, and the like — are intended to filter out (2). But they aren't good at filtering out (1).
(1) can always occur. There's not a great way of avoiding that until they actually get on the job. Of course it's unpleasant to fire somehow who doesn't work out, but I don't see how take-home assignments are supposed to help here with (1). Whereas the (2) people shouldn't be in the industry at all, and they're lucky to somehow scam someone into giving them a job, but the industry should not be financially supporting scammers or their families.
I'm personally not convinced that (2) is as big a group as many people believe it is.
> We realized they were just good interviewers
It sounds like they didn't hire solely on the strength of the résumé, because then wouldn't interview performance be irrelevant? In contrast, there are people with strong résumés who don't interview well, regardless of the interviewing method.
> The two people I know we hired on that basis quickly cycled out (one fired, one quit) because they were pretty terrible.
This is how it should work, I think. Hiring is extremely difficult. Mistakes will be made. The key is to quickly correct those mistakes and move on.