HDQRS. DEPT. OF THE GULF, NINETEENTH ARMY CORPS,
New Orleans, August 29, 1863.

Major General H. W. HALLECK,

General-in-Chief, U. S. Army:

GENERAL: I have the honor to acknowledge the receipt of a letter from the Secretary of the Navy to the Secretary of War, inclosing a letter of Rear-Admiral Bailey, with the indorsement by the Secretary of War and your own indorsement, transmitting to me the papers, and asking a report.*

In answer to these several communications, I have only to say that I have no knowledge whatever of the transaction to which it refers, and have never given, in any manner or from or at any time, any authority for such proceedings. I have read the letter of Rear-Admiral Bailey with utter astonishment. I should as soon have proposed to sell New Orleans to the French Government as to participate in any movement having in view the violation of the blockade of the rebel ports. The only order that I have ever issued upon the subject of trade is that of January 12, 1863, a copy of which is inclosed.+ The seventh and eighth paragraphs only relate to the subject of trade, and both are limited to operations in the vicinity of New Orleans, having not the slightest possible reference to any interference with the blockade. As you will see, the seventh paragraph simply gives authority to the planters to bring the products of the country to the city of New Orleans, for sale here, and to receive in limited quantities plantation supplies, to be transported within the lines of the army. It was never intended nor understood that this gave authority for any other transactions than the local business of this part of the country. I ask your special attention to all the provisions of this general order.

Upon my arrival here, many propositions were made to me to participate in speculative movements, having in view the purchase and transport of cotton out of the rebel lines by the sea. I have no reason to doubt that an extensive movement of this kind had been prepared; on the country, I have every reason to believe that extensive arrangements had been made, in which prominent men in both Governments were interested, to obtain supplies of cotton by running it out of rebel ports and throwing it into the blockading squadron, then to be claimed by the parties owning it, with the understanding that it was to be delivered to them. I saw at once that this was a violation of the blockade, which would as effectually destroy it as if the squadron had been withdrawn. The whole of his arrangement was known to the officers of the rebel Government, and at the very first attempt to put it in operation it would have been published to the world by the Government as an invasion of the obligations due to other States. I declined participation in any operation of this kind, without hesitation or qualification, against the very strongest persuasions, remonstrances, and defamation. Dr. Perkins, the agent of the Confederate Government, who had obtained a contract for purposes thus indicated, called upon me in person to explain his object and the practicability of the plan, to which he stated he had obtained the assent of the rebel Government. He presented an original contract made for the purpose specified, copies of which I inclosed to the Secretary of State at the time, and copies of which are herewith inclosed.# I immediately said to Dr. Perkins that it was impossible for me to enter into any arrangements of this character with him to which he replied that it was not only possible, but that I would

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*See of August 5, p. 669.

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+See Series I, Vol. XV, pp. 643, 644.

#Not found.