The attack that people are worrying about involves control of a majority of mining power, not control of a majority of mining output. So the seized bitcoins are irrelevant. The way the attack works is that the attacker would generate a forged chain of bitcoin blocks showing nonsense transactions or randomly dropping transactions that already happened. Because they control a majority of mining power, this forged chain would be the longest chain, and therefor a correct bitcoin implementation would try to follow it, with bad effects. This in turn would break the existing bitcoin network.

The government almost certainly has enough compute power to mount this attack if they want.