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Consider using "pepper" for our hashed passwords
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Description

For even better security, we should consider encrypting our hashed passwords.

A scenario where the password database is compromised (e.g. sql injection, tool labs config messed up), but PrivateSettings.php is not compromised, is not unrealistic. Encrypting the passwords with some sort of stored secret could help in such a situation.

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Totally agree on this. I've been working on a secret-sealing patch, to generically encrypt sensitive stuff when we store it (e.g., in memcache, but it would work for this, and user tokens too). I'll see if I can get that finished and published.