* Al Shabaab left positions in the city on Wednesday
* Residents fear guerilla-style revenge attacks
By Mohamed Ahmed and Feisal Omar
MOGADISHU, Feb 23 (Reuters) - Ethiopian and Somali troops searched houses for lingering al Shabaab militants in the captured rebel stronghold of Baidoa on Thursday, said a regional official and residents hopeful of a new start.
The al Qaeda-backed militants suffered a significant blow when they surrendered the strategic city on Wednesday after columns of Ethiopian troops backed by tanks rolled through outlying areas.
"We were engaged in house-to-house inspections today. With the help of residents, we collected bombs, grenades and explosive devices," Abdifatah Mohamed Ibrahim Gesey, the governor of Bay region which includes Baidoa, told Reuters.
Ethiopian soldiers set up bases at the former government headquarters and at the city's airstrip, as well as checkpoints on the road leading southeast to Mogadishu.
Al Shabaab appear weakened as Ethiopian and Kenyan troops move on rebel strongholds in southern Somalia, but they must be routed from the port city of Kismayu, their main outpost, for any hope of a military victory, security analysts say.
Addressing a conference aimed at energizing attempts to end the anarchy in Somalia, U.S. Secretary of State Hillary Clinton demanded greater efforts to cut funding for al Shabaab militants fighting Somalia's weak Transitional Federal Government (TFG).
Some civilians who had fled Baidoa early on Wednesday having feared a bloody battle for control of the city began trickling back, quietly celebrating what they hoped was the end of al Shabaab's draconian three-year rule over their lives.
Any joy, however, was tempered with anticipation of revenge attacks.
"The capture of Baidoa reminds me of the good life when the government ruled here. Life was pleasure and there was cash everywhere," Rukia Aden, a mother-of-four, told Reuters.
Others forecast businesses would benefit from the end of taxes levied by the militants infamous for amputating the hands of thieves, banning women from wearing bras and forcefully recruiting youths into their rank.
Addis Ababa sent troops across the border into Somalia in November to open up another front against the militants already suffering financial constraints and internal divisions.
Ethiopian Prime Minister Meles Zenawi said last month his troops would stay indefinitely in Somalia until AMISOM troops replace them, to avoid a power vacuum that could see a resurgence of Islamist militants or warlords in the country. (Additional reporting by Abdi Sheikh; Writing by Richard Lough; Editing by Sophie Hares)