Militia is already too much tied to faction controlling town, not a town itself. Such thing is another way of giving faction random items for doing absolutely nothing. Single militia costs how much - 1000caps? Battle equip of single pvp player much, much more - and he has to loose it cos other gang is sleeping? I see no sense it this.
I'd prefer Wipes Suggestion, to transfer all the looted stuff (or maybe a percentage of it) to the local traders. They are milita after all, civilians recruited from the town/city, no slaves of controlling faction. Why shouldn't the local trader make a bit profit out of it.
Reese might actually have a point here...Until the gang in control of town is notified every time militia are under attack this suggestion is good since as it is now attacking gang, unless caught then reported to controlling gang, risks nothing.