In an amusing story, the Wall Street Journal is reporting that Buena Vista, VA is fighting a big financial firm in New York (ACA Financial Guaranty Corp) for ownership of their city hall.
“A financial firm is fighting City Hall—and angling to take over the building itself.
Buena Vista, Va., borrowed $9.2 million through a bond offering in 2005 to refinance a municipal golf course. It pledged as collateral, of all things, its City Hall and police station.
Now, amid financial difficulties, the city says it can't pay its debt, triggering a showdown over these public buildings.
On the other side of the battle is a big New York insurance company, ACA Financial Guaranty Corp., which is obligated to pay bondholders if the city defaults.”
We offer that the city of Buena Vista should stop fighting for the right to own city hall and the police station. In fact, why stop there? Sell all other city assets in order to pay all financial obligations. This is exactly what is supposed to happen in a default. This is capitalism at its best. The fat is cut (in this case, city property and hopefully bureaucratic jobs in the city) and assets are transferred to the stronger hands. The markets then clear and life goes on.
On a more academic level, it’s not like the citizens of Buena Vista can no longer enjoy the buildings or the property. It’s not like ACA Financial can move such things. It’s merely a formality of the title being transferred from one owner to another.