With the NSA (the government) now asking for individual passwords of all users. The limits of government abuse can increase exponentially.
People could easily be framed by the government by planting fake emails (received or sent, fake documents, etc. The data could then be used as evidence to prosecute anyone they wanted.
To be fair, they want the hashes and salts for encrypted passwords. That basically tells those providers that they can get into their password repositories but can’t crack them. To make it easier for NSA to access accounts, they just want the keys to decrypt the passwords.
Problem is that they still have to decrypt them, and they might not get the passwords correct depending on password complexity, etc.
Best analogy I can think of is if you gave a burglar the code to your alarm system but they don’t have the keys to open the doors. They’d have to break a window or a door but could disarm the alarm once they’re in.