Because he choose to not trust hosts keys which can be stolen especially
when not password-protected. Because it is documented way to configure
sshd. This scenario is very equivalent to normal Unix login procedure
excepting that passwords are not transferred as cleartext over the net. It
is most easy way for admin to teach end-users to use ssh without
(mis)dealing with hosts keys.
I think he meant "Why doesn't it respect the "secure" flag on pty's
in /etc/ttys, like all other conforming UNIX programs do?".
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