Use of reversible password encryption algorithm allows attackers to decrypt passwords. Sensitive information can be easily unencrypted by the attacker, stolen credentials can be used for arbitrary actions to corrupt the system.
The storage of passwords in a recoverable format makes them subject to password reuse attacks by malicious users. In fact, it should be noted that recoverable encrypted passwords provide no significant benefit over plaintext passwords since they are subject not only to reuse by malicious attackers but also by malicious insiders. If a system administrator can recover a password directly, or use a brute force search on the available information, the administrator can use the password on other accounts.