Bass Island to secure a supply of wood, the steamer Island Queen, with a large number of passengers and thirty-two soldiers, came up along side and lashed herself to the Parsons. An attack was at once resolved upon. The passengers and soldiers were soon made prisoners and the boat delivered up to our men. The soldiers were regularly paroled, the passengers were left on the island, having given their promise not to leave for twenty-four hours, and the boat was towed out into the lake and sunk. The Parsons was then steered directly for the bay of Sandusky. Here the men, for certain reasons not altogether satisfactory, but possibly fortunately, refused to make the attack on the Michigan. Beall returned, landed at Sandwich, C. W., and the men scattered through the country. Most of them have returned to the Confederate States; but a few days since Actg. Master Bennet G. Burley was arrested, and the trial is now going on for his own commission I should not fear the result. As it is they will have to prove that they acted under my orders, and that will in all probability secure his release, but it may lead to my expulsion from the provinces. At least pressed upon the Canadian authorities and they have considered it. Should the course of events take this direction, unadvised by you, I shall consider it my duty to remain where I am and abide the issue. I should prefer, if it be possible, to have your views on the subject. Captain Cole is still a prisoner on Johnson's Island.

In obedience to your suggestion, so far as it was practicable, soon after my arrival here, I urged the people in the North to convert their paper money into gold and withdraw it from the market. I am satisfied this policy was adopted and carried into effect, to some extent, but how extensively I am unable to state. What effect it had on the hold market it is impossible to estimate, but certain it is that gold continued to appreciate until it went to 290. The high price may have tempted many to change their policy, because afterward gold fell in the market to 150. When it was about 180, and exportation of gold was so small that there appeared to be but little or no demand for it, Mr. John Porterfield, formerly a banker in Nashville, but now a resident of Montreal, was furnished with $100,000, and instructed to proceed to New York to carry out a financial policy, of his own conception, which consisted in the purchase of gold and exporting the same, selling it for sterling bill s of exchange, and then again converting his exchange into gold. This process involved a certain loss, the cost of transshipment. He was instructed by Mr. Clay and myself to go on with his policy until he had expended $25,000, with which he supposed he would ship directly $5,000,000, and induce others to ship much more, and then, if the effect return to Canada, and restore the money unexpended. By his last report he had caused the shipment of more than $2,000,000 of gold at an expense of less than $10,000, but it seems that a Mr. Lyons, who had been a former partner of Porterfield, was arrested by General Butler on the ground that he was exporting gold, and although Mr. Lyons had no connection with Mr. Porterfield in this transaction, yet he thought it prudent to return to Canada, and while he retains the unexpended balance of the $25,000 to carry out his instructions, he has restored $75,000. I must confess that the first shipment had a marked effect on the market. I am inclined to the opinion that his theory will work great damage and distrust to the Federal finances, if vigorously followed up, and if no untoward circumstance should interfere with the operation.