ment, appropriating the proceeds, except 18 cents a pound to be reserved for their use in the hands of the chief quartermaster, until satisfactory guarantees are given that it is not to be used by any person in hostile acts against the United States, it being understood that no objection will be made to this portion of the proceeds of the cotton being paid to any private parties for private personal use wherever they may be. The effect of such an arrangement will be, first, to put into the Treasury of the United States - which will be paid over to the assistant treasurer of this department upon its receipt - from two-thirds to three-quarters of the value of this cotton, whatever its quantity may be; second, to deprive the rebel Government of any possible advantage hereafter of the appropriation of this property to its use by any chance whatever; third, to relieve our manufactories and increase our commerce to this extent, whether it be more or less; and fourth, to demoralize the principal and subordinate officers of the army west of the Mississippi by providing them with means for escaping from the service in which they are engaged, it being evident that a man who has secured to himself, within the limits of the United States, a competency for himself or his family, will not continue to risk his life in a hopeless cause. The effect of the introduction of this cotton to the market will be material to the Treasury Department of the United States in two ways: First, it will stop the drain of gold to New Orleans, which is continually taking place, for shipment within the rebel lines for purchase of this cotton upon private speculation. The drain upon the gold market for this purpose is a serious one, and cannot but be felt by the Treasury Department. In the second place, it substitutes property to this extent, which is the equivalent of gold both in our own and in the European market. From this brief statement it seems to me that the Government will obtain, if the project can be carried through, most important advantages, and guarantee itself against any possible injury that may arise from the shipment of this property, and that it will at the same time regulate and control a business which cannot be prevented, and which cannot otherwise be carried on without serious injury.

Believing this to be the case, I have directed the quartermaster to enter into any arrangement with private parties representing the chief rebel officers to carry into effect this operation.

Copies of the papers are herewith inclosed, to which I ask early attention.* I transmit them by this mail, in order that should the proposition be disapproved by the Gomay be given. It cannot go into effect until our armies shall move into the Red River country.

A second proposition, to which a second paper herewith inclosed refers, is of the same character, but differing a little in terms.* It relates to the shipment of 15,000 bales of cotton to the mouth of Red River, or to some more convenient point on the Mississippi, within one month, securing to the parties engaged in this a certain amount of the proceeds of this cotton, which is stated in the papers, and leaving the balance in the hands of the Government of the United States for its own use; the whole of it, with the exception of $ 100,000, to remain under the control of the United States until that part which is to be appropriated to individuals engaged in the transaction can be safely paid to them without a possible injury to this Government. This also probably relates to cotton belonging to the rebel Government, although it is not so specified.

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* Not found as enclosures and not otherwise identified.

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