TREASURY DEPARTMENT, July 4, 1863.

Major General U. S. GRANT, &c.:

GENERAL: I find that the establishment of a rigorous line within districts occupied by our military forces from beyond which no cotton or other products can be brought, and within which no trade can be carried on, gives rise to serious and to some extent apparently well-founded complaints.

I have, therefore, instructed Mr. Mellen, the supervising special agent of this Department for the Mississippi Valley, to confer with you as to the propriety of substituting bonds, to be given by all parties receiving permits for the rigorous line now established, or, at least, of substituting them partially.

I inclose you a copy of my letter to Mr. Mellen, and beg you to give it, and any suggestions on the subject he may offer, such consideration as the other great demands upon your time and attention will allow.

Yours, respectfully,

S. P. CHASE.

[Inclosure.]

TREASURY DEPARTMENT, July 4, 1863.

WILLIAM P. MELLEN, Esq.,

Supervising Special Agent, Treasury Dept., Cincinnati, Ohio:

DEAR SIR: I hope you are not losing sight of the very important matter about which I requested you to confer with Generals Grant and Rosecrans. I mean, of course, the allowance of parties having cotton or other property anywhere within our lines of military occupation to bring it out by their own means and at their own risk, receiving only from the military and naval services such incidental aid as would be rendered any citizens in legitimate pursuit. Such parties should, as I have already stated to you, be required to give bond, conditioned that no military or naval officer of the United States, and no civil officer serving in any capacity, connecting him directly or indirectly with the charge of abandoned or captured property or of commercial intercourse in or with the insurrectionary districts, is interested with them in the transaction for which a permit is desired, or, to their knowledge, in any like transaction in which said parties may be interested; that they have disclosed fully the names of all parties in interest in their application for a permit, and that neither they nor any person interested with them will by means of the permit or otherwise give any information, aid, comfort, or support to persons within the lines of rebel military occupation, or to rebels or insurgents elsewhere. The penal sum should be stipulated damages.

It does seem to me that such a bond would more effectually protect our military operations than any lines however carefully drawn, though probably some general lines between districts militarily occupied, but not surely and completely, and districts within which the authority of the Union is more fully established, will still be useful.

It might be well to confine the introduction of supplies into the uncertain districts (except in the smallest quantities for absolute necessaries) to parties who shall have given such bonds. You can think of this.

I observe the attacks made on you and on me expected, and must not at all affect our action. Our object must be to do our duty, and be content with the consciousness of doing it, whether praised or reviled.

Yours, sincerely,

S. P. CHASE.