government established in Virginia by the loyal portion of here population is in successful operation, and I have no doubt will be sustained by the people of the entire State whenever the thraldom of the rebel once shall have been removed.

Thus has it been made clearly apparent that in whatever direction the forces of the Union have extended their protection the repressed loyalty of the people, irresistibly manifesting itself, has aided to restore and maintain the authority of the Government, and I doubt not that the army now assembled on the banks of the Potomac will under its able leader soon make such a demonstration as will re-establish its authority throughout all the rebellious States.

The loyal Governor of Virginia is proceeding to organize courts under the constitution and laws of the State in all here eastern counties in the occupation of our troops.

I respectfully suggest that authority should be given to the President to send commissioners with the Army, with power to exercise all the functions of local government wherever the vigil authority has ceased to exist, and especially to enforce the obligations of contracts and the collection of debts due t loyal creditors.

As stated in my last report, at the commencement of this rebellion the Government found itself deficient in arms and munitions of war through the bad faith of those intrusted with their control during the preceding Administration.

The armory at Harper's Ferry having been destroyed to prevent its possession and use by the rebels, the Government was compelled to rely upon the single armory at Springfield and upon private establishments for a supply of arms. Every efforts has been made to increase the capacity of that armory, the greatest product of which prior to these troubles had never exceeded 800 muskets per month. In charge of an energetic and able ordnance officer, the force being doubled and operations vigorously prosecuted day and night, there were made at this establishment during the parts month of October and total of 6,900 muskets, and it is confidently expected that 10,000 will be manufactured during the present month. On a recent vicisit with a view to enlarge the capacity of the armory, i directed the purchase of a large quantity of machinery already finished, which, when put in operation, will enable this establishment to produce during the next year 200,000 stand of the justly celebrated Springfield rifles. I respectfully suggest the recommendation of a liberal appropriation by Congress for the purpose of yet further increasing the capacity of this armory, believing that it can be made sufficient to supply all the muskets and riflefter need in any contingency. Located in a healthful country, in the midst of an industrious and ingenious people, where competent workmen can always be obtained without difficulty, and sufficiently near to all the materials needed in the manufactory of arms, it is at the save time accessible to every part of the country by water and railway communication.

After having made contacts for arms with the private establishments in this country, it was deemed necessary by the President, to insure a speedy and ample supply, to send a special agent to Europe, with funds to the amount of $2,000,000, to purchase more. I am gratified to state that he has made arrangements for a large number of arms, part of which have already been delivered. The remainder will be shipped by successive steamers until all shall have been received.

Combinations among manufacturers, importers, and agents for the sale of arms have in many cases caused an undue increase in prices.