That's interesting, actually. It's not like he's giving the students much of anything. If they don't take exam 2 their entire grade rests on the final. That keeps them honest, because if they want to skip exam 2 specifically because they're afraid of their grade they're not likely to be the sort of student who will magically do better on the final.
When I was in college our social science teacher came to class in tears and cancelled class when bush got elected. Every persons car with a "bush" sticker in the parking lot got their back windows bashed in.. I was very glad I didn't have one, and have decided to never put a political sticker on my car.