to the Kentucky banks, the owners of said assets, that the accounts may be made out accordingly and a due return forwarded to them.

The banks were informed of the seizure of their assets at the time, and one of them (the Bank of Kentucky) has a resident agent here at that time.

With great respect, your obedient,

JAMES D. DENEGRE,

President.

[Inclosure No. 3.] HEADQUARTERS DEPARTMENT OF THE GULF, New Orleans, June 13, 1862.

The return of the Citizen's Bank to General Orders, No. 40, has been carefully examined and the various claims set up by the bank to the funds in its hands weighed.

The report finds that there is to the credit of the Confederate State $219,090.94. This of course is due in praesenti from the bank. The bank claims that it holds an equal amount of Confederate Treasury notes and desires to set off those notes against the amount so due and payable. This cannot be permitted. Many answers might be suggested to the claim; one or two are sufficient. Confederate States Treasury notes are not due till six months after the conclusion of a treaty of peace between the Confederate States and the United States. When that time comes it will be in season to set off such claims. Again, the United States being entitled to the credits due the Confederate States in the bank, that amount must be paid in money or valuable property. I cannot recognize the Confederate notes as either money or property. The bank having done so, by receiving them, issuing their banking upon them, loaning upon them, thus giving them credit to the injury of the United States, is estopped to deny their value.

The "tin box" belonging to an officer of the supposed Confederate States, being a special deposit, will be turned over in bulk, whether its contents are more or less valuable.

The bank is responsible only for safe custody. The several deposits of the officers of the supposed Confederate States were received in the usual course of business, were doubtless, some of them, perhaps largely, received in Confederate notes, but for the reason above stated can only be paid to the United States in its own constitutional currency.

These are in no sense of language 'special deposits." They were held in general account, went into the funds of the banks, were paid out in the discounts of the banks, and if called upon to-day for the identical notes put into the blank, which is the only idea of a special deposit, the banks would be utterly unable to produce them.

As well might my private banker, with whom I have deposited my neighbor's check or draft, as money, which has been received as money and paid out as money, months afterward, when my neighbor has become bankrupt, to buy up other of his checks and drafts at a discount and pay them to me, instead of money, upon the ground that I had made a special deposit.

The respectability of the source from which this claim of the bank proceeds alone saves it from ridicule.

The United States can in no form recognize any of the sequestrations or confiscation of the supposed Confederate States, therefore