FLAG-SHIP BLACK HAWK, Cairo, October 29, 1863.

Major General WILLIAM T. SHERMAN:

DEAR GENERAL: I have just received yours of October 25, and am glad to have the Army and Navy in conjunction once more. You don't know how I miss my old then we had something in anticipation, while lately I have thought the whole affairs was getting to be very stupid.

I congratulate you on your accession of honors in having the command of the Department of the Tennessee transferred to you. I am sure you will do justice to the position. It is one requiring considerable address just now, for our Secretary of the Treasury has started two or three systems of trade, all as various as the hues of the chameleon. General Grant and myself recommended a very simple plan by which all parties would have been satisfied, and Mr. Mellen, the Treasury agent, was sent out here to set the ball in motion. The plan was to make everything subordinate to military necessity in those States that are not actually in the Union, and the general commanding was to decide when the line of trade should commence, and when it was to end. I was to see that the regulations were carried out on the water. A big circular was issued by the Treasury Department, and an army of Treasury aids appointed to carry out the regulations. A greater pack of knaves never went unhung. Human nature is very weak, and the poor aids, with their small pay, could easily be bribed to allow a man to land 100 barrels of salt when he only had permit for 2. And so on with everything else. The thing is done now so openly that the guerrillas come down to the bank and purchase what they want. Sometimes they take what is necessary for them and then burn the boat, as they did last week with the steamer Mist, that landed without the cover of a gunboat.

I think there should be but one rule of trade. Steamers should not be allowed to land anywhere but at a military post, or a place guarded by a gunboat; this gives them fifty landing places on the River Mississippi.

Wood-piles should be guarded by gunboats, and by troops near posts. All through trade to New Orleans and back should be protected, the people made to feel that the navigation is uninterrupted, and such through vessels should not be allowed to land anywhere except under cover of a gunboat for wood, except at military posts.

It would be very difficult to discriminate just now as to what constitutes contraband of war. The inclosed paper* shows what the President considered contraband just after the war commenced, and I do not see why the rebels should have any more favors shown them now than then. One thing is certain, if trade is permitted along the river indiscriminately, the rebel armies will be much better fed and clothed than they have been. I have endeavored to shift around with the orders from the Treasury Department, and the orders that have heretofore come from General Grant, or indorsements made by him on permits. There has been a great system of speculation carried on by persons who have taken advantage of permits and by Treasury aids, I am told, but that is no business of mine; and as I don't want the gunboats to perform the part of excise vessels, I have confined them to looking out for powder and ball, military clothing, or what might be used as such-medicines, gold and silver, Confederate money, and such provisions as could be used in an army.

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*Not found.

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