WASHINGTON – Banks that have received federal aid are using the money as they see fit, in some cases providing new loans to customers, retiring debt or buying mortgage-backed securities, a chief investigator told Congress on Tuesday.

The answer is the first of its kind since the government launched its Troubled Asset Relief Program, a $700 billion program aimed at thawing frozen credit lines by injecting banks with money. So far, the government has disbursed some $300 billion to the banks and committed to spending billions more, but has not required banks to say how they planned to use the money or track its expenditures.

Treasury officials worried extensive reporting requirements would be too cumbersome or even impossible to enforce. And when nearly two-dozen banks were asked by The Associated Press in December to provide answers, none gave specifics.

Neil Barofsky, who audits TARP spending as special inspector general for the program, said Tuesday that every one of the 364 financial institutions surveyed by his office were able to give at least some details on how the money was being used.

While some responses were general, others provided "granular detail" of their spending, including the identification of specific loans made possible with TARP dollars, Barofsky told the Senate Finance Committee.

Barofsky said a more detailed analysis of the survey will be completed by summer.

"One thing is clear: complaints that it was impractical, impossible or a waste of time to require banks to detail how they were using TARP funds was unfounded," he said.

The government's handling of the money has ignited populist anger and even attracted the scrutiny of filmmaker Michael Moore, who attended Tuesday's hearing. Moore is making a documentary on the financial crisis.

Barofsky's testimony came as the Government Accountability Office, the investigative arm of Congress, released its own assessment of the bailout program, also calling on the Treasury Department to increase transparency and oversight.

The job of managing the $700 bailout program is currently being performed by Treasury's Neel Kashkari. Treasury declined the panel's invitation to have him testify.

In a letter to GAO, Kashkari called the recommendations a "thoughtful step forward." He also noted that Treasury had taken steps in recent weeks to improve transparency and oversight of the administration's economic plan, including hiring more staff and setting up a Web site to aid public communication.

Still, lawmakers said they were frustrated with the freedom banks have been given through TARP and related programs, which Barofsky estimated puts some $2.9 trillion in taxpayer money at risk.

"This is a huge, unprecedented financial commitment," said Sen. Max Baucus, D-Mont., the committee's chairman. "It strains the comprehension of taxpayers and policymakers alike."

The issue of accountability took a new turn this month, when insurance giant American International Group Inc., paid out $165 million in employee bonuses after having been promised $182 billion in government aid to keep the company afloat. Lawmakers have proposed legislation to try to recoup the money and regulate future compensation packages for financial executives.

Lawmakers also have questioned AIG's willingness to pay off its trading partners in full using taxpayer dollars.

Barofsky said his office is investigating the issue, including who approved the payments.

Gene Dodaro, the acting head of GAO, told the committee that his staff could do more to increase transparency of the federal aid programs if it could legally demand information directly from banks that receive federal aid.

Dodaro said Congress also should give the GAO the power to investigate the Federal Reserve's activities. Its operations are mostly shielded from auditors under banking laws intended to protect the political independence of the Fed.

Lawmakers signaled a willingness to increase GAO's powers to follow the money trail wherever it goes. Baucus and Sen. Chuck Grassley of Iowa, the top Republican on the Finance Committee, have introduced legislation that would give GAO access to financial records and other information of banks participating in the aid program.

"I start with the premise that the public's business ought to be public, and the expenditure of this money I've put in the category of public," said Grassley.

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Government Accountability Office: http://www.gao.gov

Treasury Department Web site on economic plan: http://financialstability.gov

Air Canada stock sinks as restructuring weighed

CALGARY, Alberta (Reuters) –
Air Canada shares sank 22 percent on Tuesday as analysts speculated that the resignation of its CEO, and the naming of a replacement known for his restructuring expertise, may signal the airline's second filing for creditor protection in six years. Montie Brewer, who has led the airline through the industry downturn and has had to scramble to raise cash while competing with rival WestJet Airlines Ltd, will be replaced as chief executive on Wednesday by Calin Rovinescu, a key figure in Air Canada's last corporate revamp under bankruptcy protection.

Canada economy on track for dismal first quarter

OTTAWA (Reuters) - Canada is on track to post one of the worst economic performances in its history in the first quarter, likely pushing the central bank to go beyond interest rate cuts in its efforts to combat the recession. Statistics Canada said on Tuesday that shrinking manufacturing production, particularly in autos, led gross domestic product to shrink 0.7 percent in January from December. That made for a year-on-year downturn of 2.4 percent, the steepest fall since the last recession in the early 1990s.

Syncrude duck deaths now triple initial tally

CALGARY, Alberta (Reuters) - The death toll among ducks that landed on a toxic waste pond at Syncrude Canada Ltd's oil sands operation last spring was 1,606, more than three times higher than previously made public, Syncrude's chief executive said on Tuesday. Syncrude CEO Tom Katinas disclosed the final count after getting permission from prosecutors in a criminal case against Canada's biggest oil sands producer over the deaths, which became symbolic in efforts by green groups to highlight the environmental impact of developing the huge energy resource.

Snow and floods threaten North Dakota cattle herd

SASKATOON, Saskatchewan (Reuters) - A deadly combination of floods, heavy snow and cold in the midst of calving season threatens to thin North Dakota's cattle herd. A winter storm covered much of the state's southern areas Tuesday, and the National Weather Service was forecasting snowfall of between 10 and 20 inches by Wednesday. Overnight lows for the capital Bismarck are forecast to be well below freezing through Friday.

Bank of Canada says global stimulus to work: report

OTTAWA (Reuters) - Bank of Canada Governor Mark Carney is confident that stimulus measures taken by governments around the world will succeed in restoring growth, according to a newspaper interview published on Tuesday. "There is a tremendous effort underway to reinflate the global economy . . . this is going to take time . . . it will work . . . there will be a restoration of global growth," he was cited as saying to the Calgary Herald.

Canaccord to cut 20 percent of brokers in Canada

TORONTO (Reuters) - Investment bank Canaccord Capital will slash 20 percent of its brokers in Canada, its second staff reduction in five months, a spokesman for the company said on Tuesday. The decision makes Canaccord the latest Canadian financial services company to issue pink slips because of the global financial crisis that has dragged major stock indexes to their lowest levels in years.

Canadian serial killer says was denied fair trial

VANCOUVER, British Columbia (Reuters) - Serial killer Robert "Willie" Pickton did not get a fair trial when he was convicted of the brutal murders of six women at his pig farm in Canada, his lawyer said on Monday. Errors during the 11-month trial, including the judge's answer to the jury's only question during its deliberations, warrant giving Pickton a new trial, attorney Gil McKinnon told an appeals court in Vancouver.

Liberals take slight lead: poll

OTTAWA (Reuters) - Canada's opposition Liberals have gained a slight lead in popular support over the ruling Conservatives amid increasing unhappiness over how the government is tackling the economic crisis, according to a poll published on Monday,. The Leger Marketing poll for the French-language Le Devoir newspaper put the Liberals, led by Michael Ignatieff, at 35 percent popular support, compared with 34 percent for the Conservatives, who won a strengthened minority in the general election held last October.

Canadian auto union won't reopen GM contract

TORONTO (Reuters) - The Canadian Auto Workers union said on Tuesday it will not reopen its recent concession agreement with General Motors of Canada, but it would be willing to look at alternative measures to help reduce the burden of the company's so called "legacy costs". The union's statement comes a day after the Canadian and U.S. governments rejected viability plans presented by GM and Chrysler, with Ottawa suggesting that General Motors and the CAW should reopen recent bargaining talks.

Canada sees G20 boosting resources for poor

OTTAWA (Reuters) - This week's G20 summit is likely to boost resources for poor and developing countries through the World Bank and the International Monetary Fund, Canadian Finance Minister Jim Flaherty said on Monday. "This recession is hurting some of the lowest-income countries in the world. Canada's always been prepared to help and we are prepared to help again," Flaherty told reporters in advance of the London summit of the world's leading economies.

The Shanghai Composite index outperformed all global markets in the first three months of the year, logging its best first-quarter start since 2000. The SCI soared 30%, while the MSCI Emerging Markets index ended flat and the FTSE World index lost 9%.

"This remains one of the healthiest charts we can find," stated Strategas Research Partners' first-quarter technical report.

U.S. investors could have participated in the run via Morgan Stanley China A Share Fund (NYSE:CAF - News), which rocketed 49% year to date. But investors should be aware that this closed-end fund's shares are trading at a 17% premium to its net asset value, or the value of its holdings minus fees and expenses. That's near the highest in its three-year history.

Closed-end funds can trade at a discount or premium to NAV because they issue a fixed number of shares that trade on exchanges according to investor demand. Open-end mutual funds issue or redeem shares directly with investors at NAV, while ETFs have an arbitrage mechanism designed to keep their share prices trading close to their NAVs.

Not all China funds have fared as well as CAF this year, but several are rallying strongly from lows. IShares FTSE/Xinhua China 25 Index (Toronto:FXI.TO - News) is down 2% year to date, but it's blasted 49% off its October low of 19.35.

IShares Hong Kong , down 1% year to date, is up 22% from its November low. SPDR S&P China shot up 47% from its trough although it's ticked up only 1% for the year.

PowerShares Golden Dragon Halter USX China (NYSEArca:PGJ - News) is flat year to date but has climbed 37% from its bottom.

Anticipated Recovery

The gains come on the heels of a 4 trillion yuan ($585 billion) stimulus package, five interest rate cuts and record new lending, which benefits businesses. Thanks to a government order, banks increased lending by 24.2% year-over-year in February.

"China's banking system is generally solid, and the government was quick to roll out a huge stimulus program to try to boost domestic demand," said Richard Gao, manager of Matthews China Fund (NASDAQ:MCHFX - News). "We are cautiously optimistic on a recovery in the second half of the year."

Chinese moves are aimed at achieving 8% GDP growth. The government has unveiled spending plans valued at nearly 16% of GDP over the next two years. The world's third-largest economy is expected to be the continent's fastest grower, with a 7% expansion this year, according to Moody's Economy.com.

But the economy could be slowed by weakness in exports, Moody's warns. Demand is down in developed markets, China's main customers. Exports fell 25.7% year-over-year in February, a rate close to those of South Korea and Taiwan.

"Sensitivity to U.S. and European export markets is a big concern, but China and India have the wherewithal to power 5%-6% growth this year through infrastructure spending and domestic demand," said Anthony Craddock, senior vice president of international equities at Bailard and co-manager of HighMark International Opportunities (NASDAQ:HIOMX - News).

New Developments

Van Eck Global Advisors has filed to launch Market Vectors China A-Shares ETF. It would offer exposure to a share class only available to local investors. The proposed ETF would use swaps and derivatives to provide returns that match its underlying index. Van Eck intends to apply for China's Qualified Foreign Institutional Investor program, which lets foreign investment groups access local markets. But the process involves a great deal of red tape and could take years.

China intends to launch the long-awaited Nasdaq-style board at its two stock exchanges May 1. The GEM board may help small and medium-sized companies raise money for expansion.

It will list companies that have been operating for more than three years and have net assets of at least 20 million yuan ($2.92 million). Profits of two consecutive years have to be at least 10 million yuan ($1.46 million).