The site may be following the guidance in the article "Stop Password Masking", posted by Jakob Nielsen on June 23, 2009.
Summary: Usability suffers when users type in passwords and the only feedback they get is a row of bullets. Typically, masking passwords doesn't even increase security, but it does cost you business due to login failures.
type attribute between
"text", letting the user make his own tradeoff between usability and security against shoulder surfing.
The site in question is described as not quite following this advice. Perhaps the engineers were following this advice but then management requested that it be changed. Or perhaps they were trying to emulate the behavior of mobile devices that briefly show the last entered character in password fields.