Arrangements for the exchange of all naval prisoners held in Texas were partially effected, but eventually fell through in consequence of the rebel agent insisting upon having Admiral Buchanan included in the exchange of officers captured at Mobile, and of Rear-Admiral Farragut declining to give him up, as he had been instructed to send him North.

This Department has no disposition to retain Buchanan, if by delivering him up we can secure the speedy o the naval prisoners in Texas. Hi is expected North in the supply steamer Fort Morgan the latter part of this month. On his arrival we propose sending him and any others we may have to you, or placing them at your disposal, to be given in exchange for our prisoners in Texas.

The agreement between this Department and Mr. Mallory is to exchange mutually all naval officers and men, and to give an equivalent to whichever side might hold an excess.

The particulars of the recent delivery of officers and seamen at City Point belonging to the navy have not been communicated to this Department, nor has it been officially notified of their exchange. There were some who were not delivered to us on James River, but were on parole within our lines. It is not known whether they have been exchanged or not.

The Department has not ventured yet to assign any of those who came from Richmond to active duty, because it does not certainly know their status.

Regarding the persons above referred to as having been exchanged, the excess is against us and equivalents will have to be, is they have not already been, furnished.

This Department has no roll of the rebel prisoners who were sent out it the Circassian and delivered to Commissioner Ould, and cannot, therefore, state what the excess was. We have in Texas about 50 officers and 300 seamen; we have to give for them about ten officers at New Orleans and Admiral Buchanan, together with the seamen captured at Mobile, who are also at New Orleans.

The most feasible plan seems to me to be to deliver Admiral Buchanan to Mr. Ould, and to give instructions for the rebel naval prisoners at New Orleans to be given up to the agent for exchange on the part of the rebels in that quarter, and then for Mr. Ould or the authorities at Richmond to send instructions to the agent of commanding officer in the Trans-Mississippi Department, to deliver up our naval prisoners there to the U. S. authorities, equivalents to be given to whichever side may have an excess. To facilitate the matter this Department would be glad to take charge of a duplicate of the instructions that the authorities may issue to their officers in Texas as to the exchange, and undertake to forward it to its destination as soon as possible.

The Department requests a reply to this communication at your earliest convenience.

Very respectfully, &c.,

GIDEON WELLES,

Secretary of War.

MEDICAL DIRECTOR'S OFFICE DEPT. OF THE EAST, No. 125 Bleecker Street, New York, November 17, 1864.

COMMISSARY-GENERAL OF PRISONERS, Washington, D. C.:

SIR: I have the honor to transmit the report of Surgeon Sloan, U. S. Army, of his inspection of the prison camp at Elmira, N. Y., made by