Declan McCullagh of C-NET is reporting that several large internet companies have received legal requests from the government to turn over passwords along with the encryption algorithm that guards them.

The U.S. government has demanded that major Internet companies divulge users' stored passwords, according to two industry sources familiar with these orders, which represent an escalation in surveillance techniques that has not previously been disclosed.

If the government is able to determine a person's password, which is typically stored in encrypted form, the credential could be used to log in to an account to peruse confidential correspondence or even impersonate the user. Obtaining it also would aid in deciphering encrypted devices in situations where passwords are reused.

"I've certainly seen them ask for passwords," said one Internet industry source who spoke on condition of anonymity. "We push back."

A second person who has worked at a large Silicon Valley company confirmed that it received legal requests from the federal government for stored passwords. Companies "really heavily scrutinize" these requests, the person said. "There's a lot of 'over my dead body.'"

Some of the government orders demand not only a user's password but also the encryption algorithm and the so-called salt, according to a person familiar with the requests. A salt is a random string of letters or numbers used to make it more difficult to reverse the encryption process and determine the original password. Other orders demand the secret question codes often associated with user accounts.

No one knows how broad this effort is to get passwords - whether the government demands individual passwords or password "dumps." And even with the algorithm, it should be hard to crack the password code.

But is it?

Algorithms, known as hash functions, that are viewed as suitable for scrambling stored passwords are designed to be difficult to reverse. One popular hash function called MD5, for instance, transforms the phrase "National Security Agency" into this string of seemingly random characters: 84bd1c27b26f7be85b2742817bb8d43b. Computer scientists believe that, if a hash function is well-designed, the original phrase cannot be derived from the output.

But modern computers, especially ones equipped with high-performance video cards, can test passwords scrambled with MD5 and other well-known hash algorithms at the rate of billions a second. One system using 25 Radeon-powered GPUs that was demonstrated at a conference last December tested 348 billion hashes per second, meaning it would crack a 14-character Windows XP password in six minutes.

The law regarding encrypted passwords is murky. There just hasn't been enough precedent to make a determination. Broadly speaking, in criminal cases the courts have sided with the government. But otherwise, if the Feds want to snoop your emails, it is up to the individual internet company to fight back on your behalf and refuse to turn over your password.

Congress should get busy and address this loophole immediately.