THE NAYY. KEPOST OP SECRETARY WEUES, Hai't Department, Dec. s, 1861. Sis : Xa «obni!ttag the animal report of the transac tions of Ibis Department and of tbe navy, with those of tbe several bnreane for tbe year, It affords mo ptoiaare to ass-ore you that the condition of affairs is satisfactory, and that the discipline and efficiency of tbs service con tinner to be faJthfnUy maintained. Altar many years of peace and comparative inactivity, tbe officers and sailors of onr navy wore suddenly called to tbe performance of extraordinary and exacting dunes, and during nearer fgnr years of exhausting civil war JbeThave manifested their attachment to the Union.and tbetr fidelitj totbc national flax by riaidiy enforcing a inaantic Woohade of our coatt. dv vieiuntly pwrolhng the great national • livers of the interior, and by a succession, of wean and colStwie© elneS«on?t achievements which have not only added^fffourn&v* l renown but greatly promoted -our national integrity and strength. ■When the change of. Administration took place m March#lS6l, the war had already been virtually began— Sefork and arsenals, and custom houseß. aad mints. Sad navy yards, and national property within the rebel States had been seised without resistance. The retiring Administration manifested its inability to assert the national authority, and its disinclination to vindicate the national supremacy, anu closed its term, and that or the Thirty* sixth Conarees, without ■ any preparatory measures for the tremendous convulsion which was even tbes shaking the Union to its centre and threaten ing our existence as a nation. .... Ci six weeks after I had eatered upon the administra tion of this Department, a blockade, extending over more than three thom and five hundred miles ol our coast, was ordered; and jot this stupendous work, pro nounced to bo impracticable by the highest for&Jgoatt tboriliss, we bad a feeble navy, reduced to the .lowest peace establishment, composed largriyofsatiing ves sels, moat of which were dismantled .ofr dispersed Abroad. Of the limited number of seamen j by law. oniv about two hundred were all UxSInSW& and recsivmjship, Manyof the officers became demorflized and deserted. In this en feebled condition, without men, or ships, or resources placed at 1U disposal, the Department was called upon to establish and enforce the most extensive blockade that was ever undertaken to be efieotaaily maintained by any nation. , , . _ *To make available evtrynaval vessel* to ieM,U our foreign gquadronMo increase our force by bttildmgnew vessels, and by procuring for naval purposes, from the mere l ant service, ovary steamer which could bemade a fighting vessel, to enlarge as cnee the capacity of the navy yards, to put in requisition the foundries and workshops of the country for supplies of ordnance and ■team machinery, to augment the number of seamen, and to supply the deficiency of officers by selecting ex perienced and able shipmasters and others from the commercial marine, were among the Important and re sponsible duties which were precipitated upon the De partment at that exciting and interesting period. , The measures prompsly and energetically adopted caused an immense navy to spring into existence-not *o carry on a maritime war, for the rebels had no navy to stimulate onr sailors to glorious deeds.nor commerce to reward their activity; batmen, and boast, naval expeditious were organized at the earliest possible period to assert and restore the naiioualan thority at important'pointa within the insurrectionary ration. The first of these expeditions was organized and sailed from Ss mpton Roads in August, under the command of Rear Admiral sfcringhftex, and resulted in the capture of fiatteras, and waa the first re*conquest of a strong position winch was effected on our coast. TyfiwasfcCowedafew tresis later bythe victory of Bear Admiml DuPont at, Fort Royalv winch secured a comnodiousharbor for •he ships ofthe South Atlantic fiquadrott.f 'DhAAehieyeinents on the lower Mississippi, where EeduAdmiral F&i .agut dashed open xtne gates of the passage to New Orleans* and restored to the union iherbmnftrci&i metropolis of ite South, pllsheume following spring. Those three important expediiicus, comprising, in each ease, a larger fleet than had ever been fitted out on this continent, and two of them seldom euTpaesad in naval annals, were planned, organized, and carried into execution, in the first year of the war, in addition to an immense block ade. which was at the B&iua time so vigilantly and rigorously enforced that the rebels even then felt and complained of its exhausting severity. Other harbors and places have from time to time been seized and oc cupied—the last being the bay of Mobile, and the fortifi cations at its entiance, effected by the same distin guished officer who had thrown open the lower Missis sippi to uninterrupted navigation two years before. Bor have the prowess and skill of our navy in this un happy contest, involving the integrity of the Union and onr national supremacy, been felt upon the seaboard alone. On our fnlan d waters, at Fort Henry, at Done!- son, at Shiloh, at Island Ho. 10, at Memphis, at Arkan sas Poet, at Yicfcsburs, at Port Hudson, and at almost every important place on tbe Mississippi, the Cumber land, the Tennessee, and other rivers or the Southwest, the navy has been active in re-establishing the na tional authority, A fleet of more than one hundred vessel? has bean put afloat on those waters, and moat of them are now patrolling, thoae rivers in the national pause, It has been the policy of this Department, rigidly ad hered to under all circumstances, and from which it has not allowed Use f to be diverted, never to permit the efficiency of the blockade to be impaired during these domestic troubles. Hence no large squadrons have been maintained on foreign stations, uruiaersand men of-war have been, sent out or ordered to important points to protect American interests, and capture or de stroy the few predatory rovers which from time to time have ventured abroad to depredate on our commerce. THE DI.OCKADB, The blockade of a coastline oftkree thousand fire hundred and forty-nine miles in length, greater in ex tent than the whole coast of Europe from Cape Trafal gar to Cape North, is an undertaking without precedent in history. During onr lait war with Great Britain, When that Power had eight hundred naval vessels in commission, not a single port of the United States was thoroughly dosed. The most serious attempts of the great maritime Powers have consisted in endeavors to Interdict trade at a few of the principal ports of a belli gerent. Immediately after closing the ports of the States in rebellion, and givingthat act the character of a blockade* the efforts of this Department were directed towards securing several harbors at comparatively equidistant points, aa bases of operations for the several jsquadrons, where our naval vessels could receive their supplies, and maintain themselves at their stations ana on their cruising ground, without return ing to northern ports for repairs and refit ments. To have done this would not only have en dangered the efficiency, but in some instances might have involved an abandonment of the blockade. To this end there were set on foot various coast expeditions, Which have resulted in our taking possession of or dossing all the ports excepting "Wilmington. From various causes, Cape Fear river is more difficult to blockade than any port on the coast of the United States. The two main entrances are forty miles apart, and these., two are subdivided into several others, each of which Affords an entrance to vessels. The water shoals gradu ally and regularly to the shore*line, and numerous iso* lated batteries are erected along the coast, so that a Blockade* runner of light draught is not under the ne cessity of making directly for tbe entrance, but can. by the lead, iun close under the land protected by the bat teries, and psss in over the bar at leisure. When coming out, a steamer will se.eot her own time, thus securing every advantage, and she can pass either up°tor down the coast before making an ofliing, or she may proceed straight out to sea, trusting for her escape to the night and favoring darkness and mists, and the fact that she is under full speed, whilst the steamers blockading jnußi have low steam. Almost every vessel employed in violating the block ade has been constructed in England with great skill, regard-ess of cost, and with sole reference to engaging in this illicit trade, the profits of which are almost as remunerative as those attending the slave trade, a kin dred traffic, that all Christendom discountenances, and the most powerful maritime nations have combined in measure bus a fraction brtfif blockade. The cupidity of English merchants, aided by iheir vast resources, together with the advantages derived from those triangular depots of blockade-run ners and of rebel supplies—the ports of Halifax, Ber muda, and Nassau—poriß which will always he in sym pathy with the enemies ol this country—has induced them to engage in this trade. The illicit traffic with the rebels, who are making war upon our Government, belongs to that code of commercial morals which projuptidthe smuggling of opium into China, and the rule of those who engage in it is to trade, tegallv or Illegally. If it be illegal, it is the business of the Chi nese and Americans, not of Englishmen, to prevent it. Many who have failed to make themselves acquainted With the facts connected with rite Wilmington blockade have been free and severe in their censures of the man ner in which it has been conducted. The intelligent officers of the naval aud merchant service, who have labored with untiring Zealand assiduity, and watched with eleeplesß vigilance through weary months of win ter and summer, aud in all weathers, stimulated by the hope of benefiting their country and receiving its thanks, as well as by every inducement to fame and pecuniary reward, if do not concur in the •opinion that the port oi' Wilmington, can be entirely closed by blockade. Convinced, as this Department always has been, that it is necessary to lake nvesession of the entrances, so as to permit out armed vessels of light draught to go in aide, no opportunity has been omitted to impress the necessity or joint naval and military operations for that purpose. The navy has been at all times ready to per form Us part in tuch an expedition; but the army has not yet beeu ahe to unite in a conjoint movement. Heither branch of the service eaaexpem to be success ful in an attack upon this position independent of the •other. Were there deep water at Wilmington, as at Hew Orleans, Mobile, and Port Royal, either of those operations could have been repeated at that point, hut by reason of the shoalnexs of the water, an exclusively naval epezation cannot be relied upon to be successful. WESTIA7 GULP SQUADRQX. An object earnestly cherished by the navy, but which had been delayed for army co-operation, was the pos session of the bay of Mobile. In anticipation that tfrig would receive early attention, Bear Admiral Farragut rejoined his squadron in January,but the operation was , still farther postponed for military demonstrations in-' Texas and on Bed river. .Commodore Belli who had been left in charge, ac tively cooperated with the army In its movements for the occupation of cei tain points in Texas, The possession and occupation of Brownsville, briefly mentioned in my la%t report, was followed by a like movement at Brazos, .Aransas* and Gabolio passes, in all of which the laval forces detailed by Commodore Beil, and placed under command of Commander J, H. strong, afforded all required assistance. Prior to the occupation of the left bank of the Rio Grande, the month of that river had been made the rendezvous of vessels of various nationalities engaged In violating, indirectly, the blockade; the demoralized condition of Mexico, and the mutual rights o! the two countries on the river and at its entrance, affording un usual facilities to the illicit traders. Commander Strong reported some sixty vessels anchored in the Mexican waters of the Bio Grande, carrying on an extensive trade, chiefly in cotton, with the rebels through Mata xneros, which had thus suddenly become a great com mercial mart. This traffic, which had been prosecuted With success, in consequence of our inability, under treaty stipulations, to completely blockade tne Bio Grande, was effectually stopped by the occupation of Brownsville, which was followed by the President** proclamation of February 18,1864, relaxing, condition ally* the blockade of that port. But this possession of the several porta of Texas was deration. After & few months 1 occupation the lailitaiy forces were withdrawn,and the duty* of guard ing that extensive coast was thus again devolved ex clusively upon the navy. Under orders of August 18th. to Rear Admiral Farragot, the blockade was resumed t>n the 9th of September, at d has been since maintained. The bay of Mobile, guarded & t its entrance by two im posing fortifications, constructed by the Federal Go vernment in former years, was difficult to blockade, and was one of the principal ports for illicit trade with the rebels* It had been the steady purpose of this de partment to get possession of that bay as soon as opera tions on the Mississippi would permit the detachment of a sufficient co operating military force for the expedi tion. But repeated co-operative movements having flue purpose in view were commenced, and then aban- Spned for army operations elsewhere. In the mean-. the rebels, availing themselves of this delay and of the advantages of this position, proceeded to the col lection and construction of a formidable navy, with a yiew of raising the blockade. The information received was of such a character that the Department deemed it important that Rear Admiral Farragat should resume Ms command, which he did, and on the 18th of January arrived off Mobile. It was no part of the plans or intentions of that officer or of the Department to await thel.offenalve movements of the yebel commander. To attack, not to defend, was his policy; and it was with some impatience that he await ed the means to justify him In putting that policy into successful operation. Knowing the disadvantage of at tacking iron-cased vessels with wooden ones, and that, *2?A. la r 1 * aud underthe guns of heavy fortresses JtitiKNU a co-operating Una force, he deferred the nece seary elements of success could jeacn nim. But in the meantime he stood evsr ready ■■jfSjLy®** ol ® strength with the iron-clad should it venture to come out Thus he constantly threatened an attack on Mobile, thereby B * neral movements elsewhere. 2P*2E?SX?^i W f 1 8 S* eor i* ia the early part of August, and two iron* ciads from James river, and two from the Missiseippi haying reached him. Bear Admiral f«r5 fc tlie of the fitiTof August, got his fleet under way and entered Mobile bay, passing between Forts Morgan and Gaines. Bi lenoing their guns to he PMsed. he encountered the re bel iquadron, which by 10 o’clock was dispersed, rap tured, or destroyed. This engagement. f a many re spects one of the most remarkable on record,and which added new lustre even to the renown of Bear Admiral Farragut,.was not without serious losson the part of his fleet. The most serious of these was the destruc tion of the iron dad Tecumseh, one of his most formi dable vessels, by a torpedo, early in the action,and the loss of her gallant commander, T. A. M. Graven, and jpearly all of her brave officers and crew. It was from «he Tecumseh that the first shot was fired at Fort Mor- SEHI ®*b total casualties, not Including those of the 2*2®SS?h t were fifty-twokilied, and one hundred and *vyenty wounded. XfaffiXJS? ca Pti»re of <a*e of the’ reberraiboats by the Ketacomot, aig the retreat of two, others under the K2Si?i tSL H «F- the iron-clad ram Tennessee, ®fWSSLJ&SS®RSft^Wi2pga: WlujoßSOf her 16-inch tho“,%° o ke th*on|h%« l a ; Sof o’clock fihe surrendered. Twenty officers and Shoot'' one hundred and seventy men were captured In tMs Vessel, and ninety officers and men in the Selma The capture or these two vessels, and the retreat ot the two remaining rebel gunboats ander the mns of Fort Mor gan, terminated the glorious battle ofthe fifh of August —On the following dayone of the iron-clads shelled lort Gaines with such effect that Colonel Anderson, the commander, sent a communication to Bear Admiral Barragnt, offerirg to surrender. General Granger, commanding the united states military forces, was sent .for, and the terms of capitulation were signed by the xespectivo parties on hoord of tile Hartford. From this time onward movements were In progress for dfipturingffort Morgan, and on the ®d of August, at clay dawn, a bonrbnrdtntatx wins opeued from the shore J)gitcrlcs, thenlqnltors and slaps inside, and the rassels outside Hie bay.At6aM of the 23d, a white flag Was displayedmft®hejß, and at 2 o clock P. M, tha fort was uccohdiUpnalilytSat jiiiiaercd to the navy and army of the United blajsH. a naval shore Inliteiy did good sorvios ottdapssOCOtMjioii. rortPowollhgboen already attacked on the night of the 6th and blotfjjup, the guns falling into our hands. .The capture dfrwts Bowen, Games, and Morgan, and the destruction of the rebel fleet, gave ns possession of the bay, and closed the port to all ingress or .egress of blockade runners.. This was all .that was contem plated. Possession of the city of Mobile could not make the blockade more effectual, ftud a sufficient Cooperating laadwrce, which coaldaot thcttb? spared ( to take and hold tho Place, farther demonstration was nivai operations, tho bar .had--been strewn with torpedoes, and ns late as the ISth. of Sep tember, Bear Admiral Fmra.ut wrote the Department that he was stiaenpsajredin removins them.- One hnn dr“d it was reported had boon placed tn the bar br the rebels. east arty squadron. The limits of the Eastern Golf Squadron have been extended so as to embrace within its cruising grounds the waters of the Bahamas and the vicinity of Cuba. On the 7th of Augug Acting Bear Admiral Bailer* whose health was suffering from the debilitating in fluence of the elimsto, turned over the command of ( the Squadron, by permission of the Department, to Captain Theodore P. Greene, the officer next in rank, aud came North. Csptern Greene continued in until the 12th of October* when he was relieved by Acting Bear Admiral C. E. Stribling. ~ - . , ' Notwithstanding the sanitary precautions adopted for the health oLthis squadron, many of the vessels failod fO escape The infection of tbe yellow fever, so much and eojustlydreaded, and had to seek a Northern climate during the summer. The system of promptly ordering vereels to a healthier locality the moment they became infected has been in its effects salutary, the ravages of the dtseaee.have, thereby.been checked, and the ship’s complement eoonrestored to the usual standardorhealth. 4 Although the squadron was temporarilrreducedby these withdrawals, no serious interruption took placa In the disposition of the blockade, which has continued tobeeffeciwe. Less frequent captures* and other in dications* demonstrate that the traffic and communica tion with the Florida coast has pietty much ceased. The monotony of.blockade Dm has, in repeated in stances, been broken by boat expeditions and armed iuenrsious for the destruction of salt manufactories, •which abound on the Florida shore, many of which are the public property of the insurgents. These expe ditions, although apparently unimportant when com pared with the greas naval achievements which have given renown to our sailors inneighboringwaters.havo nevertheless inflicted serious injury upon the rebels,by exhausting their resources, and have developed the zeal and energy of our officers and seamen. A number of such expeditions have been organized during the year, and conducted to a successful issue with, little loss of life, and without relaxing or neglecting the spa del and paramount service of the blockade. In May an expedition was planned by the rebels for capturing or destroying one of our blockading steamers off Apalachicola. Tha organization consisted ofeome hundred men led by rebel naval officers. Information of the proposed movement was timely received, and a joint na-tal and mtiitaiyforce was despatJed agatiwt the party and succeeded in SJ, with sit nf their seven boats, their ammunition, flags, Sid flccomoani n)ents. Demtled report, of tMs affair, axwellasof otlsr£wMtt are creditable to the officers in them, form a part of the appendix to this report. SOUTH ATLANTIC SQTTADBON. The coast under blockade by the South. Atlanticsquai ron is about three hundred miles in extent, and a con siderable portion of fib is a network of inlets and sounds. Within the Emits of this command are two of the chief seaports of tbe ineurgeute—Charleston and Savannah— cities of wealth and marts of commerce in other days, but the war which they commenced* ani which-thgy still continue to wage against the Union, has caused each of them to be sealed up, and has destroyed their wealth and*proBpeiity. ~ . , , , . The cravlngfor commerceand la«irie|A{CharieBtoa, ; which the Aii-. creasing hazards of running the blockade at winning ten* have prompted some reckless adventurers ,to ex pose their fortunes in efforts to . elude the squadron Of Admiral Dahlgren. Several valuable steamers having been lost in these attempts, the efforts were for a time almost entirely discontinued.- Charleston and Savannah, besides being among the best defended points on the Atlantic coast, possess ad vantages for a navy# on which the insurgent leaders felt much reliance la the early days of the rebellion. There they have had armored vessels, and rams,, and torpedo boats, or * ’Davids ft and *‘ Divers, ’' elements' with which they threatened to achieve success oyer the open warfare of the navaLforces of the Union. Charles ton, disaffected without cause,and aspiring without en terprite, having, after long and persistent efforts, suc ceed ed in seducing others to engage with her in assail ing the National Government, and attempting a dis- . memberment of the Union, fails to become either a na val or a commercial emporium- She has dragged down others without elevating herself, and is fast becoming a waste. No formidable independent operations, in the form of naval conflicts, have neen made by the squadron da ring the year, A steady, unrelenting blockade has been rigidly enforced, with no attractive and exciting incidents, but which has been effective And exhausting upon the rebels. , • .... In February a detachment of vessels was sent to the fit. John’s river to aid a military force intended to be thrown into Florida. Rear Admiral Dahlgren accom panied the expedition in person, saw the proper co operative arrangements made, and assigned an ade quate naval force, which is holding possession of all points on the St. John's occupied by our army. In March a diversion was made at Bail’s Bay. In r May a force was detailed to co-operate in an effort to sever the railroad between ChrrUston and Savannah. Adetach ment of iron-clads crossed Stono bar in July to assist General Foster in ademonstration upon the rebel works on Stono river and James Island. Bear Admiral Dahl gxen conducted the naval force in person; In these and other military movements the navy has been always active and ready io extend cordial co-operation to every army operation. In February permission was given to Bear Admiral Dahlgren to leave his squadron in command of Com modore S. C. Rowan. On resumiac his duties in: May, he found that General Gilimore had been called, with the greater part of Ms army, to another field, leaving behind, however, a sufficient defensive force when sus tained by the navy. The withdrawal of eo large a portion of the military force necessarily put a itop to further serious demonstration against Charleston. The retention ox the harbor, as well as the entire safety of that coast, depended thenceforward mainly on the iron-dads. They were indispensable for Ihe con tinued possession of Morris Island by our troops, and they could not have been withdrawn without putting in jeopardy the blockading fleet which, as well as the laito force, would have been assailed by the armored rebel vessels. The capability of the monitors to hold position off Morris Island had been controverted by the former intelligent commander of the squadron, who denied its practicability, and had deemed it his duty in June, 3563, to enter a protest against it.' His re presentations, with those of the officers then in com mand of the iron-clads, that those vessels could not re main off the harbor, nor neater to that point than North Bdisto, with other suggested difficulties, caused the Department to consider well its purpose before carrying out the original order, that the monitors should remain inside the bar and off Morris Island as the only effectual' method of entirely closing the port, and making further demonstrations. The views of the Department were sustained by other naval officers of judgment and ability. Younger officers also made a voluntary tender of their services, as well as some of those who had doubted, each offering to take the risks which the great stake juttfied; while the sailors, always ready for any service or to encoun ter any hardship, imitated and emulated their ex ample. The result has been that Bear Admiral Dahlgren. has kept these vessels for seventeen months where it was insisted they could not remain, to the great injury of tbe ordinal seat of the rebellion. The work has been irksome and laborious, unremunerative, and perhaps not sufficiently appreciated, for it has been quiet and undemonstrative, without those occasional captures which, before taxing possession of the harbor, enli vened and rewarded the officers and crews. Intelligence that the rebels were strengthening Fogt lumpter, building bomb proofs and mounting heavy guns on the channel faces, led Bear Admiral Dahlgren early in the summer to entertain the thought of attack ing mat fortification, and attempting the passage with his iron* clads. It wsb a question of great respbnsibili ty, for the assault, if made, would draw upon the ves sels the concentrated fire of many powerful batteries; he therefore called a council of his officers in command, and, after a full discussion, a large majority deemed it, under the circumstances, unadvlsable. It was con sequently abandoned. , • -— i ingin the diecomfitureof tne rebels. Details of these, as of those of tie other squadrons, are appended to this report. Occasioxal assaults have been made upon our Vessels off Charleston by torpedo boats, and in one instance with success, by sinking the steam sloop-of war Housaioaic, but fortunately with little loss of life. • . NORTH ATLANTIC SQUADRON. The number of vessels and officers ffhd meu employed in the'North Atlantic Squadron exceeds that of any other, azd its importance Is certainly not leaf. Iu ad dition to blockading the only remaining port of com-' merciaL intercourse iu the rebel States, on this squad ron lias devolved the duty of guarding and holding pos-‘ sezslos of the great inland waters of North Carolina and Virginia., and an extensive co-operation with the armies which are threatening Richmond and its vi cinity. In order to secure the most thorough and efficient dis charge of duty that is possible in every departmentof this squadron, and especially that of the blockade of Wilmington, Acting Rear Admiral lee, by direction of the Department, established fonr divisions of the squad ron, viz: one cn James river, one in the sounds of North Carolina, andiwooff Gape Fear river and adja cent inUts, each of which was placed under an expe rienced officer, and Acting Bear Admiral Lee removed bis headquarters in July from Hampton Roads to Beau fort. For some months previous to May last the rebels had been left In quiet possession of James river for a con siderable distance below Richmond, but the progress of the Fotomac army towards the rebel capital was the signal for active operations in another quarter. On the sth of May Major General Butler moved his army from Newport News, under convoy of a naval force which had been assembled for the purpose, up James river, and made the following night a successful landing: at Bermuda Hundred and City Feint. The movement wm. quietly performed, and the landing was promptly ef fected. The absence of a military or naval force on the James river had been improved by the rebels to plant in its bed formidable torpedoes, by wMch two of the light draught boats were destroyed. From the landing of the Army of the James in Hay, a naval force competent to meet the armored vessels and rams of the insurgents, had they made a demonstration! has been maintained on the upper waters of the James. On various occasions sharp but brief engagements have occurred between our vessels and the rebel batteries forming the defence of Richmond. The naval force had anticipated an encounter with the rebel fleet which had been in the course of prepara tion for two years, but the military commanders, out of abundant precaution, ordered obstructions to be placed iu the channel by sinking vessels for the pro tection of the large transport fieetthat was in attendance upon the army, and which it was apprehended might be disturbed and perhaps endangered in the narrow waters, were a demonstration to be made by all or any portion of the rebel navy. The security of the trans ports was justly deemed of vital importance to the aimy, and. required to be placed beyond any contin gency. Hence this obstruction of the river, in addition to the protection afforded by our iron- clads and other naval vessels, was doubtless a wise military precau tion, although it restricted the movements'of the navy. The, operations in the sounds of North Carolina have been interesting and important. It had been a cherish ed idea of the rebel leaders to repossess themselves of the sounds, and to regain the principal places on them, which had been wrested from rebel authority early in the war by the united efforts of the army and navy. Pre parations were long in progress for the construction of armored vessels, and others of light draught, on the Boanoke and Heme rivals, -with intent to descend and' drive out from the sounds our fleet of slijhtljr-built wooden boats, recapture Plymouth, Hewbern, aud oiber points held by our arms, and to- establish, rebel power In that auarter. These Behemes, though partially successful at the commencement, soon closed in disaster; Delays in the completion of the armored vessels or dered by the Department, aud especially intended for service in shallow waters, which were Inaccessible to the monitor veseels already built, jeoparded our posses «ion of the sounds. There waaadso the want of an ade quate military force in that quarter. On the 17th of April the rebeia besieged Plymouth, and two days after the rebel ram Albemarle descended the Boanoke river end attacked the wooden gunboats lying on that town. On thelQlti the defences were carried, the garrison became prisoners, and the rebels obtained pos session of the upper sound. Li consequence of army re verses, vigorous measures were immediately taken by this Department to prevent further disaster. Captain Melnncton Smith, an officer of much naval experience, - was sent to the spnnds with vessels of heavier arma ment,.and instructed to take command, attack the ar mored ram at all hazards, and use all means to destroy her, On the sth of May the ram came ont of Boanoke river, and Capt. Smith engaged her with his gunboats. The action continued from 4 49 to 7.30 P. M , when darkness intervened, and the Albemarle retreated up the river. Shot fell from her armor apparently without effect, and the efforts to run her down were unsuccess ful. Her consort, a-email army steamer which had been captured and converted into a naval vessel, was recaptured. On but one subsequent occasion did the Albemarle make her appearance, and then she qnickly retired on {2“« fl *ed at As there was no known cause to prevent her making another demonstration, a competent naval £ l 3F e «* rM /* wa^S s*adinesa to meet her. But the in activity of awaiting her movements was irksome and and her destruction by other means became an object. Lieutenant W. B. Cushing, a young officer who had on previous occasions sained toe admiration of tho Dei partment table daring and adyentuiona heroism, was relected to destroy the JUbemarla by a torpedo, properly arrsigsd in a Ugbt picket-boat, to be placed af Ms dis- Egsali torpedo is tho invention of Chief Engineer W. W. Wood, and possesses extraordinary power. It was arranged and applied to the pick, t-boat at the eng- Seation and under the direction of Brer Admiral F H Iregor, and Ms abl# assistants. Lieutenant Cashing wasdireeted to have the means for carrying ont the views of the Department prepared, .and, whan these wereroMideted, It was quickly and brilliantly exe cuted. With fourteen brave officers and men, who vo lunteered for the service, he, on the night of October 27, ascended the Boanoke to Plymouth, assailed the ram at her wharf,though guarded by mmllitaiy force on shore, as well as by her crew, and »unk her. Only himself ai la “neof his party escaped death or capture. »Kma d ? rln * andbuccesefui exploit removed the reli- of Plymouth. Commander Macomb, se m the sound., promptly availed himself of wlth 4 H,e a «l MS , sfj‘lenJe^la,lt5 f j‘ len J e^ la,lt Cushing’s achievement. f<n se at his command he pressed on to from their rifle-pits and fbanicea of October took; possession of a few prisoners, thirty-two can ¥n“nnltlon, thus re-establishing **sB. sounds of Soith Carolina. .From inly, 1663, when the rebels were driven from Morris Island by the combined forces of Bear Admiral Dahliren and Major General Gillmore, and the navy thereby gained command of the entrance to, and pos session of, Charleston harbor, so that monitor vessels could remain inside, blockade running cessed almost entirely in that quarter, and was transferred to. and vigorously proseented at, Wilmington. This locality possesses singular natural advantages to resist a blockade, to which the rebels bars added others in the way of earthworks, with powerful guns, to cover tne blockade-runnoTs and to open on onr vessels when ever they come within range. These shore batteries y*™ “UU* to'Ototoanfl the several channels and the numerouslnlets m that quarter. »ofiii e re. i ? CTdtle * this port entirely, while 110I 10 c f??uf ,a A and which none of bv t rsl2Sy} t .% heavy broadside batteries can approach bB of toe water, can With^heTnramw 4^!, 4 only who are familiar tion Win?™, ?* and have had experience on that sta nsS'ed thiV wi a 00, operating land force, It is not ex ffire tofbif,*? 4 close the port of Wilmington. blockadeat that win?hre°bein'%£& ness by foreign capitalize, aeweli tir «£ °LB3B Suck has been and is the of that articles of coipaerce command WbolaSs pAees throngkoat tie whole Insurrectionary reSoo? theiebv stimulating tho cupidity of reckless neutrals* BtS while a succesefol trip begets large profits, the block ade bas not hem violated with impunity- Hravv iweekftve THE PRESS.—PHILADELPHIA, WEDNESDAY, DECEMBER 7, J 864. ffurAd in the Illicit trade. Sixty-five steamers, the ag- IrflatG value of which* withthelroargoes, willscarcely foJUskortof thirteen millions of dollars, have been cap tured or destroyed In endeavoring to enter or escape froxa Wilmington* Over fifty euch results have oc curred since Bear Admifal Dahlgren anchored his mo nitor fleet inside of Charleston bar and closed that port the difficulty of closing the. main en trances to Cape FearriveT, which are nearly forty miles apart, can be formed when it Is considered that with fifty of our steamers, some of them the fastest m the service, stationed and distributed by naval officers of intelligence and experience, off those entrants, block ade- runners, watching their opportunity, and availing themselves of dark nights, good Pitots, and extraordi nary gpeed, succeed in getting into and oi.t of Wll mAc?talr Bear Admiral 8. P. tea, who for two years has baen io sommsnd of tills sonadron. discharging his ardoooa dnttas with intelligence and fldellty, was re lieved by Bear Admiral Porter, who took command of t); 8 north Atlantic Baoaaron on the 12th of October. MISSISSIPPI SQUADRON. The events', of the year have famished additional proof of the wisdom cf the policy which dictated the organization of a powerful ana efficient squadron on the rivers of the interior. Its usefulness has been demon strated on many occasions and in various ways. Whether in convoying transports laden with soldiers or supplies destined for tie army* or merchandise and , produce forjfce people; in assisting in repelling attacks upon weak military posts; in rendering more safe the navigation of the streams fo commerce and travel; in independent naval expeditions, or co-operating in extensive military movements* its importance has been ,rt Q | ffl of. 4 ~ To obtain possession of the Mississippi, and constant ly patrol that great stream from Cairo to New Orleans, ifin itself a work of vast magnitude. By it the rebel combinations have been broken, and theirorgauizatlon. severed, os it were, by an impassable gulf. The Ohio, Tennessee, and Cumberland rivers haye likewise been patrolled. Thus loyal citizens in their vicinity have been protected, refuge has been afforded to those escaping from anarchy and oppression, and partisan bands have been dispersed. To insure a systematic and vigorous execution of the duties devolving on the squadron, the waters trarersed by it have been divided into ten naval distrlcts»e&eh under the command-of an experienced officer. While the vessels in each district have their appropriate field of duty, they are held ready to support each other when occasion requires, and can be readily concentrated when an emergency demands it. The squadron is composed, to a great extent, of boats that had been employed in the carrying trade, but which have been purchased, strengthened, and fitted for war. purposes They are necessarily inferior to naval bnfit veatele in atreneth; they are lightly armed, and consequently jmora liable to disaster. But their -'cost is greatly inferor -to that of iron-clad vessels, or those of heavy structure for ocean service. The most extensive operations of the Mississippi squadron during the year have been in connection with the military ex pedition on the Bed river, which* .with the. attending in cidents, form ad interesting page in the annals of the war. The failure of this conjoint expedition to acoom pli&h the important results desired and anticipated, are attributable to causes beyond human control, and to the want of success on the part of the military arm of the service. So far as the navy was concerned, the expedi tion was chiefly one of co-operation with the army. It possessed, however, within itself tho elements or suc cess under ordinary circumstances, and had not natural lte Mstoiy might have been not 'less?teimanc thuh tho •recdr<hof .othecytcMexei&ents of this rquadron. '' On tWS th.of Match Bear Admiral Porter had assem- Wed &6 Ore month of Bod river a formidable Beet of Iron-clad ,688*18 asd of Ught-dranaht wooden boats for co-operation with' the army, and waa there joined bya poition of Major General Sherman’s force -in trasl* ports, nndertlie command of General A. J. Smith, Tbe joint forces moved up tho river on the 12sh of March to form a inaction with Major General Banks, at Alexandria. In their progress some of the vessels branched qff into the Atchafslaya, while the main per tton continnedjp Bed river. The rebels were driven in ; tjtrh from Simlßsport and Fort DeKussy, the latter fell ing again into, onr possession, with its gnns and muni tions of war and a few prisoners. Soma of the fleetest vostels were despatched to Alexandria, with the hope of cutting off the rebels in their retreat, but without success. That place was occupied by our forces, aud about the firßt of April both army and navy commenced io move up the river towards Shreveport. A part only of the naval fores could proceed further up the river than Alexandria* and it was with difficulty they reached that point. Butthe assistance of the gunboats was so essential to success that some risks bad to* be taken, and 1 extraordinary exertions'wcrS made to pass the vessels over the falls, so as to give the required 00-ope rat ion. Main force had to be used to haul the sun boats. But Grand Score was reached without accident, and occupied without opposition. There were at this time Indications of the usual rise of the season in the river, and everything promised success. Twenty-throe heavy guns had been captured from the rebels since the entry into that river. Springfield lauding was designated as the point for the next junction of the co-operating forces, and it was reached at the appointed time, three days after leaving Score, by six gunboat* and twenty heavy transports. Here they learned that the army under General Banks had met a reverse, and was fall ing back to Pleasant Hill some distance below. Bear Admiral Porter was therefore compelled to turn back, with the full knowledge .that in.Tetracing his steps he would be interrupted at every assailable point. The rebels, flushed with their success against the army, availed themselves of every opportunity which offered forharassing.the.gqnboateand tramports. . Their cavalry and artillery, taking advantage of the Winding ttream, moved rapidly from point to point, at tacking on every available occasion. But the gunboats successfully fought their way, and from time to time repelled their assailants with terrible slaughter. On tbe 14th of April Bear Admiral Porter got back to Grand Score, where he found the vessels whichhe had left at that point still detained above the bar. The river. Instead of rising as customary at this seasoa, had fallen during his absence. The army was preparing to move back upon Alexandria; the water having so re ceded, there was little hope of getting the vessels out, and destruction apparently awaited the beat portion of the squadron. But In the words cf the Admiral, “Providence provided a man for the occasion. ’ * Lieut. Col. Joseph Bailey, acting engineer of the Idth Amy Corps, an intelligent and efficient officer, devised a plan for the' construction of a series of dams across the rocks at the falls; thus by artificial means to supply that which nature withheld—Mfficient depth of water for the passage of the vessels. Extraordinary as was tie project, and received with incredulity, the rated that conceived It was enabled to .carry it into successful execution. Men were set to work; woodcutters col lected ; quarries opened; and, after some weeks, the undertaking was accomplished. The dams were built, the vessels passed safely over the falls to the delight of the assembled army and navy, who had mutually parti cipated in the work* asd on the ) 6th of May Bear Ad miral, Porter had the satisfaction of announcing that the fleet was relieved from danger. There is probably in naval history no other Instance of such peril and dif ficulty so successfully and skilfully surmounted. 1 Congress very appropriately acknowledged the meri torious services of Lieutenant Colonel Bailey on this oc casion, and they have been still farther recognized by his promotion. ' Interesting details of this and minor expeditions on the Washita, Arkansas, Black, and Yazoo rivers, will be found in the official appendix to this report. Bear Admiral Porter, having been for nearly two years on ardnous and exhausting duty in this command, received leave to return East in the summer, and was subsequently detached in order to take command of the North Atlantic Squadron. Captain A. M. Penuock, senior officer on tbe station, was left in charge. On the Ist* of November Acting Rear Admiral S. P. Lee .as sumed command of the Mississippi Squadron, and en tered on the discharge of his duties, POTOMAC FLOTILLA: The limits of the Potomac Flotilla embrace also the waters of the Rappahannock, and at present and daring tho 5 ear have been under the command of Commander Foxhall A. Parker. Upon the flotilla has devolved the duty of arresting the contraband trade attempted to be carried on across the Potomac; from VlrginiawitiLthe lower counties of itself. pahannock. The small craft, which are the vehicles of this traffic, and adapted to it, are well calculated to elude detection. Those engaged in U are reckless, un scrupulous, and unprincipled, so that on no- station are greater vigilance and more-unceasing watchfulness re quired than on the part of the officers and room of the flotilla. It is scarcely possible to wholly prevent' this species of illicit traffic and blockade running. With, so long a line of communication to be patrolled, opportu nities will sometimes be found by the contrabandists, who ere ever on the watch, and Who are aided by sym pathizing associates on either shore, to elude detection and capture. .Numbers, have, however, been captured during the year while in transit; others have been fer reted out and their boats have been’destroyed. Atall timesaid onall occasions the flotilla has given’ its active and willing co-operation to the military movements. While the army was in the vicinity Of Fredericksburg last spring and summer, the services of the smaller steamers on the Rappahannock were effi cient and invaluable*. They opened communication with the military forces; cleared* large numbers of torpedoes from the river; drove the rebels from its banks; convoyed transports with troops and supplies going to the army, and returning with the wounded and sick from the battle-field. The vessels which are employed in this service are of light draught, and their construction Is necessarily alight, consequently those who serve on board of them in a hostile country are ex posed to more than ordinary peril. Bat whether in clearing .the banks of the Rappahannock of sharp shooters, or removing from its bed dangerous torpedoes, no less daring and energy have been exhibited than by others in vessels of larger proportions and with greater protection. PACIFIC SQUADRON. There has been no material change m the strength of this squadron within the past year. The new steamer Wateree joined it. and orders have been given detach ing the. Namgansett and ordering her to the Atlantic States. Acting Bear Admiral Charles H. Bell, having bad command of the squadron for three years, has been re cently relieved by Acting Bear Admiral George F. Fear son ; the transfer took place at Panama on the 25th. of October. No hostile craft has made Us appearance in the Pacific, and our commerce has been carried on iu its usual 'channels without interruption, other than, .that ne cessarily caused by the measures of foreign Powers in an attitude of hostllily.towards.each other. The blockade of Mexican ports on the Pacific by the French fleet rendered it important for Acting Rear Ad miral Bell to remain several months in that quarter with his flag-ship, in order to look after the interests of the Unit ed States. An exception in favor of the steamers oi the Pacific Mail Steamship Company, made in the de claration of blockade, gave them the continued use of theharborof Acapulco as an intermediate depot, and the presence of the flag-ship, or some other one of the vessels at that port, has aided in giving protection to the property of the company against the acts of lawless persons, and inspired those on board the steamers with a feeling of security from assaults of insurgent cruisers from seaward. About the middle of April, Acting Rear Admiral Bell proceeded from Acapulco to Panama* and 1 hence to Cal lao, at which port he arrived on the 25th of May, 1861 Difficulties had arisen between Fern and Spain, which resulted In the seizure, by the naval squadron of the latter, of iheChincha Islands, and it was Essential that onr extensive fleet of guano vessels frequenting that quarter should have within reach an armed vessel of their own conn try to give aid and security in the event intemiption oLtheir The Reax t Td^fal^lSi 0 to ll ramain 0 With'tbe^flalihlp Callao from May until the 6th of October. The remain ing vessels of the squadron have visited the Mexican and Central American ports, and it is not known that they have foiled in any respect to respond to all proper appeals of onr country men for aid and encouragement. or to observe and scrupulously regard the rights of, and courtesies due to, irlendly nations. Bumors or reports of a rebel privateer fitting out at Victoria* Vancouver's Island, drew to that quarter the United States steamer Narragansett, from San Fran cisco. The probability of such a scheme being carried into effect was ascertained to be not greater than that which had but a short time previously drawn the United States steamer Saginaw to that locality. After .crowing, therefore, a short time in the Straits of Fuca and Fuaet’s Sound, and receiving the friendly assu rances of her Britannic Majecty’s authorities that every effort would he made to discountenance and arrest any' proposed violation of neutrality, the Narragansett re turned to San Francico. WEST INDIA SQUADRON. The West India squadron, as an organization, has been discontinued. Acting Bear Admiral James L. Lardner, who had command of it at the date of my last annual report, arrived at Hampton Roads, in the Powhatan, on the Sd of October, in pursuance of orders of the Department The principal objects for which this squadron was created had ceased to he prominent, and the chief duties originally assigned to it have been transferred to the East Gulf squadron. There have been no depredations committed in that quarter during the past year.. The vessels of the squadron have, in turn* given safe con voy to the California steamers over the most exposed section of their route. This convoy has been since, when expedient, extended over the entire route, by de tailiagan.armed vessel to accompany each steamer. PIBATICAb CRUISERS. The three English built piratical cruisers which, un der the rebel flag, have, during the the last two years, roamed the seas, robbing and destroying our merchant men, shunnieg all armed antagonists, and have found refuge and protection, and too often supplies and other assistance in neutral ports, have terminated their pre datory career. Their unrestrained warfare has un doubtedly bad the effect of diminiehing American ton nage, and caused a transfer of American shipping to English and other flags. Whether the maritime nations of the world will be ultimately benefited by this policy of fostering rebel belligerents may well be doubted. We have been compellei to encounter it as one of tha incidents of this extraordinary and unnatural conflict. While notoriously engaged in plunder and in the wan ton destruction of our merchant sailing ships, these EngUsh-hutiij&Bd almost exclusively English-manned, rovers have never, during their entire piratical career, and of all their many captures on various seas, sent in for adjudication and condemnation a single ship or car go. The lees bulky and more valuable portions of their robberies were taken on board the corsairs to be sold or covertly transferred in neutral ports, while the stolen chronometers and a few mementoes were retained as memorials of their achievements. All else was de* & Alabama, eluding our naval vessels at the (fape of Good Hope and Straits of Sunda, after committing sundry devastations, returned west ward and proceeded to the French port of Cherbourg. Information of her arrival was communicated to Captain Winslow, of the Keamrge, then at Flushing, who at once proceeded off the harbor, and at 10.20,A. m., on Sunday, June 19, the Alabama was discovered standing out, accompanied by a French iron-clad steamer and the English yacht Deer hound. When the Alanams was descried the Kearsarge wesahout three miles from the entrance of the harbor, and to avoid any question as to the tine of jurisdiction, as well as to draw the Alabama off shore, so that if dis abled she could not flee in for protection, the Kearaarge stood to seaward until she had attained the distance of about seven miles from the shore. . At 10.50 toe came quick about and approached the Alabama, and at 10.67 the Alabama commenced the actlon with her starboard broadside at one thousand yards range. At 11 the fixe was returned by the Kearsarge, and the vessels came fairly into action at about nine hundred yards distance. Captain Winslow says it was -soon apparent that Sesames did not seek close action, and fears were enter tained that after some fighting he would make for the shore. To defeat this Captain. Winslow determined to keep full steam on, run under the stern of the Alabama and rake: but the Alabama, by sheering and keeping her broadside to the Kearearge, was forced with a full head of steam into a circular track- Onthe seventh rotation the Alabama headed for the shore, disabled and at the mercy of the, Kearearge. A few wfill’diseote* shots brought down her flag, a white one was displayed,and the fire of the Kearsarge was re served. hi about two minutes the Alabama again opened fire. The Kearsarge replied, steamed ahead and laid across the bows oi the Alabama for raking. The fire of the Kearsarge being agate reserved, boats were lowered and an offioer in one.of them came along telde at 12.10 and surrendered the Alabama, which he said was in a ginktejc waditieut ftad at 12, Si she went •dOWIh '• -.4 I Tbe lausch and second cutter of the Kearsarge* the only boats act d isahiod, were seat to receive tko officers ssdcrewof (be oinking v«n»at, ard Capt, Winslow re quj&tedt.ia Deerbousd. which came alongside,to assist in toe rescue Two pitot.boats were ako eoeased ia picking np th® crew. Six officers and witty-fonT rasa were brought on board the Keaoarge. At 3 lOtheKear sarfie let go her anchor inasvea fathom* water. . The Alabama is reported to have discharged thro® hundred and seventy or more shot and shell iu tel* en gagement, but Inflicted nusericm<s damage on the Koar p.arge. Thirteen orfonrteentocif effect in end about the bull, and sixteen or seventeen about .ha .aid rig ging. The t^ artf % r Ss 6red one hundred and proiectiles, of which one alone killed aad wounded eishtof n of the crew of the Alabama, and disabled one Of her guns. Three wibmis wen; wonoflei on the Koarearte. The number of killi-d and wounded on tba Alabama ia un known. Seventeen of the wounded, two of them in a dying condition, were brought on board the Kearaarge. One hundred and fifteen officers and men of the Ala bama’a crew retched the ehores of England and. Franco. Thebattery of the Kearearge coneieted of seiTOn tana, via: Two 11. inch, one ao-pouuder rifle, and f*nr light S2-potinders. That of the Alabama eonalaled of eight ganMneheavy 68 pounder, of 9,000 pounds weigh!; one lOt-ponnder rifle,fand six heavy 82-ponnders. In the entagement the Alabama fought eeven gnus, and the Kearearge five, , ■This hae been the only fair and open eea-fight which Onr naval men have been able to secure, at yeti daring the war-, and it occurred in the English ch»anel. In eight of the two great maritime Powere of Europe. In size, armament, and complement of men, the combat antswereas near canal perhaps as could have been arranged. Mott of the crew of the Alabama: were Eng lishmen, and the gunners admitted to have been picked men of her Majesty ’s gunnery ship, the Excellent! . Some latent remains ol .pride which belong to ths pro fmion.and which animated his earlier and mora honcr able iife while eailing under the American flag, un doubtedly had an Inilaento in Inducing the pirate com mander to meet, a naval antagonist, after his long careerof robbery and.plunder or unarmed vessels. In ge vain hope that it might, lfcnccesefnl. restore to him some portion of the respect he had forfeited, and at the same time relieve him of eome of th„ debasement he has never ceased to feel, even when applaudedby those foreign part leans who hated the country he had desert ea. But the same dishonor marked Mb conduct on (Ms occasion ae dnringjiis whole-ignoble eareerJ Before leaving Cherbouixhe deposited the chronometers and other troph ee oi his robberies on shore. WheSTbeaton and compelled to surrender, he threw overhEard the sword that was no longer Me owe, amLab using the generous confidence orhis brave antagonist, be stole away.in the English tender, whose owner self, by bis conduct, a fit companion for the dlibonorod and beaten, corsair. > Having surrendered, ha cannot relieve himsilf of bis obligations as & prisoner of war until ho shall be regu larly exchanged. He, and cadi of his surviving officers and *rew, whether received upon the Keartaiße or the Deerhound, are. and will be, held to be prisoners of war and amenable to the laws which govern civilized communities. A predatory rover may sot the Jaws of nations, as well as thoaeof Mb osm country, atdeflance, but in doing so he mnft abide the eoaaeqacneo&r - The Florida originaUr sailed from England’ander the name of Oreio, and under that name she roach* ing Kassau, brought before the court through-fho efforts of the American consul, who was satisfied that she was in the rebel interest and intended as a rob&i-cruiser. The neutral authorities decided in favor of the vessel, Which, was pernutttd to proceed. Leaving Tfassau she •MSy* ?reen Cay, where she recPiveTonfboard the ftnrmment sent out for her from England! ran into Mobile,-changed her name to Florida, aharnhs since, fleeing from all naval vessels, carried on predatory war on American commerce, eapturteg: and destroyingxun armed merchantmen, without ever sending la a vessel for adjudication. In February last, availing herself ©f a dark night, she escaped from Brest* eluding the Kearearge, which was off that port. In Tune she visited the neutralport of St. George’s, and remained there nine day e, re ceiving jul the coal and euppliea necessary for a long piratical cruise. Leaving St/Georgeteonthe 27th of that month, she remained outside, bhfr in sight, for three or four days, boarding.all vessel* that approached the island, cm the 10th of : July she captured»the Elec tric hpark, near our coast; While several vessels were craietnrfor her, eecsped. and was next, heard from at Toneriffe, August. Subsequently, entering the bay of San Salvador, Brazil, sbe ; encoun- the steamer Wachusefct, commanded by Com mander Collins* to Whom she'surrendered*, and by whom she was brought in a leaky and dilapidated' con dition to Hampton Beads. Here, White.ut anchor, an army transport came in collision with the shattered vessel, which sunk a few days after near the wreck oL theuumbeiland. ~~ ...•*»!. , The Georgia, another Engltsb-bullt navaTvesiel which ernised under the rebel flag, -MMlred to Cher bourg in February, and thence proceededtethe Mersey, where she changed owners. Her Armament was re moved from her, and she left Liverpool for Lisboa. On the 16th of Angust Commodore T. T. Craven* *of the Niagara. fell in with her in latitude 39 deg. £6 min? north, longitude 9 deg. 3D min. west, sailing under the English flag. CommodoreSCraven took possession of the vessels® a lawful prize, and potting a prize crew on board of bsr, he sent her to the United States. / The Tallahassee, an English- built blockade-runner from Liverpool, which port she left in the early part of the spring under the name of the Atlanta, wae-engaged in. violating the blockade, rtxaning between Bermuda and Wilmington. lam not aware that any valid trans fer of ownership of this vessel has overtaken place, bat am inouced to believe she is now* 1 while depreda ting on our commerce, registered a? a British vessel in the custom house at Liverpool Whatever may be the fact in that particular, this English-built neutral ves sel, which had been previously engaged in. the unneu tral employment of carrying supplies to the rebels who are waging war upouour Government, came out of Wil mington early in August armed, officered, and manned for predatory warfare, anebunder the command of J. T. Wood* formerly of our navy, commenced the piratical work of destroying peaceful merchant ships; robbing them of money andother valuables, asdjetainiugas tro phies of his heroism the stolen chronometers/ Informa tion of the operations of this vessel reac&edth* Depart ment on the 12th of August,-and orders vntye immedi ately sent for all the available vessels withixrconvenient distance to start at once iu pursuit. Several vesselspro ceeded to sea that evening, and within forty-eight hours sixteen vessels from New York, Boston, Philadelphia, Newport* and Hampton. Beads were in search of her. But she reached Halifax in safety. Instead' of remain ing there nine days, getting supplies, as did the Florida at Bermuda, the authorities would permithor to receive only a limited quantity of coals.and she was therefore but a short time in that port. The Fontoosuc arrived in pursuit of her a few hours after her departure. She was, at last accounts; in Wilmington. THE NAVAI FORCE. The subjoined statements present a general exhibit of the navy, including vessels under construction on the Ist of December, 1864* with a comparative statement of the navy in December, ISB3 and 1864. • r a tabular statement is appended of the number of naval v« ssels, of every class, that have been constructed, or are iu the course of construction, since March*, 1861: GENERAL EXHIBIT OF THE SAVY, INCLUDING VESSELS UK DEB CONSTRUCTION, DECEMBER, 1864. :le*oripaoa. 113 Screwsteamersespecialy.constrtefe- ' x .*. ed for naval purposes.. i 1,438 10y,231 62 Paddle-wheel steamers especially * • constructed for naval purposes.. 6M 61,878 71 Iron-clad vessels...*... ■ 276 80,693 149 Screw steamers purchasedjcaptut- . . ed, &c.; fitted for naval pur- , , - „ p05e5...'60,380 174 Fad£ le*wheel steamers purchased. captured, &c. , fitted for nava\ . • 921 79,“52 m Sailng vessels of aH - <B5O ■ 69,649 UT-, ry .j ■ « ayiLg»ft.On<t COMPARATIVE STATEMENT OP TUB KATT, - DECEMBER, - AlBBB ANO 1864. 51 • .. ' I 671 Total navy. December, 1851.. 4,810 810,398 6tB Total navy, December; 4»443 467,967 S 3 Actual increase for the year... . t.. 167 42,429 23 Total losses by shipwreck,in battle; capture, &c,, during the year-...» 146 13*084 Actual addition to the navy from 109 . December, 1883, to December, 18641 313 66,613 TE3£EELc CONSTRUCTED FOEJ’HE NAVY SINCE H ABC II No, description } - tox’ge 7 Screw sloops, Ammonoosttc class, 17 tol9gutis,3,2l3to3,7i3ton3each.; 121 23,637 1 Screw sloop Idaho, S guns and 2,€38 L _ t0n5.*....... 8 2,638 8 Screw sloops, spar deck, Java class, _ 25 guns and 3,177 tons each.. 800 25,416 2 Screw sloops, spar deck, Hassalo class, 25 gas s and 3,365 tons each.. SO 8,730 10 Screw sloops, clippers, single deck, Confcoocoofc class, 13 gansand22B» ■■ tons each...... 130 23,480 4 Screw sloops, Kearsarge class, Bto 12 A guns, and averaging 1,043 tons eaeh 40 4,692 8 Screw sloops. Shenandoah class, Bto 16 guns, and 1.387 to 1,533 tons each 74 \ 8,584 2 Screw sloops, Ossipee class; 10 to 13 _ -• , • 'guns, and-1,240 tons each. 23 2,480 8 Screw sloops, Serapis class, 12 .guns M and 1,320t0ns each... 86 11,040 4 Screw sloops, Bes&ca class, 8 guns _ _ and 831 to 900 tons each..;,. 32 3,462 8 Screw sloops, Bipsic 'class',' 7 to . guns and 693 tons each..7l 4»7« . 23 Screw gunboats, TJnadUla class, 4 _ to 7 guns and'so7 toss each.**.....» 123 .11,651 9 Screw tugs, Pinta class, 2 guns and „ 360 tons each...... *•**. 18 '3,1 2 Screw tugs, Pilgrim class, 2' guns and IK)ton* each.... *•••;,»««. *4 _• o*9 13 Paddle*wleel steamers, double-eua- * eis, Ociorara class, 7to II guns and - „ , rt , 730t0955t0ns each 98 .11,024 * 28 Paddle-wheel steamers, double-end ere. Saeracns class, 10 to 14 gaits • „ and 874 tons each.................... . 272 25,324 7 Paddle-wheel steamers, of iron, doable- enders, Mohongo class, 10 - , guns and 1 5 030 tons each.*.......... 70 7,210 1 Paddle-wheel steamer, of iron, dou ble-ender, Wateree, 12 guns and . .... 974 tons. «.*«***..«.* 12 974 J 42 IS 175,986 . IRONCLAD VESSELS.. _ ~ 2 Sea-going casemated vessels, Pun- . | derfaergand Bew 1r0n5ide5........ 28 8.576 3 Sea-going turret vessels, Puritan, . f Dictator. andHoanoke...... ~ 12 9,733 4 Double turret vessels, Kalamazoo 1 class, 4gu&6and3»2Cotonseach.... 16 12,830 4 Doable turret- vessels, Monadnock I class, 4 guns and 1.664 toss each... 18 6,256 1 Double turret vessel, Onondaga, 4 „ - I gun5and1,280i0n5.».»»*••.*........ 4 1,250 4 Double turret vessels, Winnebago f class, 4 guns and 970 tons each.*... 16 3,830 5 Single turret vessels, Caaonicus ’ class, 2gunBandl,o34tonarea«hi4..*' 18 8,272 9 Single turret vessels. Passaic class, - ' 2to 4 guns and 844 tonveach..♦.«, 3J 7,598 M Single turret vessels, Yazoo class, ■ 1 to 2 guns and 614 tons each....;.. 85 12,280 2 Single tnrret vessels, Sandusky and Marietta, 2 guns each. ........ 4 953 3 Single turret vessels, Ozark,Keosho, . and Osage, 2tq7gunseach........ IS 1,624 2 Casemated vessels, Tuscumbia and Chillicotio, 6 and 8 guns reap ac tively* ......mm 8 788 ~82 ~ ~ 189 73,988 203 I*B3l, The foregoing tabular state meni exhibits the number and description of vessels that bays been constructed, or put in the course of\construetiou« for the »avy since the institution of active measures for the suppression of the rebellions Some of them have ? been built by con tract; others by the Government, in the several navy yards. If we add to the-number those constructed un der similar circumstances, and within the same period, that have been lost by snipwreck, in battle, ate., viz; the sloops Hous atonic ana Adirondack, and the Iron ~clads Monitor, Weehauken, Keokuk, Indlanola. and Tecumseh, the aggregate would be 210 vessels, K 676 emus, and 256.755 ions, . . • - • Picket-boats, and small craft built for especial pur poses, are not embraced in this statement. coxsruuoTzox ox XAVAL VESSELS, At the commencement of the rebellion the navy con sisted of sailing vessels, a few paddle-wheel steamers, and screw vessels with auxiliary steam-power. Among the latter, the principal and most important were the Bteam frigates, which, on account of their great draught of wafer; were unsuitable for any other purpose than that of cruisers on foreign stations as nag ships, for which- indeed, they were is tended. These vowels had been, built to meet the conditions of their day ; some of them, the Mississippi, for instance, had been in service more than twenty years. When constructed the prin cipal object in view was armament, not speed, and they were equal, if not superior, to the vessels of other naval powers. ' For attacks on forts, when accessible to naval attacks, or to protect troops in landing .they can still render service/ Time was required to repair and place in proper condition such of these vessels as were dismantled, and also those which were recalled from service abroad. The sailing men-of-war had become useless for fighting purposes. In the emergency that devolved upon It at the beginning of hostilities, the Department resorted to the commercial marine, an d purchased every available merchant steamer that could advantageously be converted into a naval vessel, and be used to enforce the blockade. • •'; ' » The want of a class of small, heavily armed, propeller vessels was felt, 1 and the Department immediately pro* ceeded, on its own responsibility, and without any ap propriation or authorization by Congress, to contract for the construction of twenty* three gunboats, of which the Unadilla, Pinola. and wissahickon* may be taken as the type* Some of these vesseU were afloat, armed, and manned within four months from the date of con tract, and participated in the attack on Fort Royal; others took part on the lower Mississippi in passing the forts and in capturing New Orleans. These gunboats con* tinneto maintain a good reputation, and their steam machinery givts satisfaction. Well adapted as they are for guarding our coast, a larger descriptienwas needed for ocean service, and four vessels of the class of the Oesipee, mounting each two guns of eleven inches, were built. There were also four vessels of slightly less tonnage constructed, carrying the same#rmament, of which the Kearsarge is the type. The Shenandoah is the type of six vessels, mounting each three eleven inch guns, all of which sustain a high reputation; The heavy gnne mentioned constitute the principal arma ment of the several classes named, but they each have in addition from two to six guns of less calibre. All of these vessels are screw steamers, suitable for sea crais ingibut for the shallow sounds and bays, the rivers and bayous, often narrow and tortuous, another and different class, drawing less water, was found to be necessary, and for them competition was invited- To turn in these frequently,restricted channels te difficult, and sometimes impossible, and the necessities of the case suggested the principle of a fighting vessel with a double how and rudder at each end. Twelve paddle wheel steamers constructed on this principle were built. somelathe navyy.rtiß and ot'aersUycontract. The Port Royal and Sonoma are types of this class. An additional number, -amounting to twenty-seven, or these donble-bowed- paddle-wheel vessels have been built, almost all of them by contract.! The Sassaoas, Which was distinguished In the attack on the rebel ram in Albemarle sound, tlio Metacomet, conepicuoas in Mobile bay, and the Eutaw, are types of these vessels. Eight of this class are built or, building of Iron. ani.wiil have etwsgilx eufflelentfw se» wivlee wmU ae (or itt- One of them, the Wateree, sent round * re^c \t d .gan Francisco iu September last, and is on duty m the Pacific. 2 rdtl ‘ l£ fi \s? armed vessels suitable for naval ope °* n tbe Mjsßifsippi and its tributaries, the Dq parlment invited plans and propositions from ship builders and others acquainted with those waters, and the vessels buiit on those rivers have been chiefly from L.® jp lanfi cnbmUted by parties thus invited. Two of at b i* houis, participated iu the ac “rovSt Mobrte “ d *•*. dune g«d Tiro entire class of monitor or tnrretod vessel, lias Dten brouaht into existence during this war, and the coast and harbor iron-dads have been serviceable in James river, at Charleston, and at Mobile. Modifica improvements have been made In this slate of armored vessels. TOf prownre for iron-clads of Ught draught, which TOOid ascend the rivers and penetrate the sounds aad «£?Jl?'- ioiJg< l ur coagt , was fmt to be a necessity. The operations of our armte® in the vicinity of the inland and adjacent to the rivers required the constant gunbdats. Bat the men thus employed, as yffl-l as the maßazines and machinery of the vessels are exposed, eßpeclally in the narrow streams with high Some vessels, and not a few vate- exposures, and in ®5?® r I®, afford all possible protection to the gallant men D ?f« , j? r *«* t ? eeo the Department oon- it n duty to provide armored vessels of light it was ascertained, however, when the first two ap proached completion, that their draught of water was more than was intended. The heavy armor and the Gle * en fuch guns, with the machinery to give them proper speed, involved the necessity of enlarging the capacity of each of them. When making these cfstory alterations it was deemed advisable, under ap plications from gome of the commanders of squadrons ror boats that should present but a small rise above the sumceof the water, to dispense with the turrets in five SL t i e *;Li igb iu dratlgbfc , v ? 88e L 8 J wit i a view to special Th . e . r «“ai?lflf ordered to be * T their decks* thereby giving them additional tonnage and greater draugtt, and making a l ?*. m^JL e ®t C l n i? other respects carrying out the original design. This work is now being po£ most of the yesßels are near completion. The exigencies of the times and the necessities of the war have stimulated the inventive faculties of our coun trymen to vast improvements in vessels, in engines, in ordnance, und projectiles. That in some instances they ato not at first entirely snccesslui is not surprising. Mistakes and even failures will occur. In nearly every cless of vessels that have been bnUt, and especially those that are armored,, more or less alterations have been found necessary while they were being constructed. Only twooftne monitor class of vessels—the Dictator and Puritan—are proposed for sea service. Their suc cess, of which the inventor and builder is sanguine, is among the experiments that the period and:the exigencies of the country have imposed upon the De partment. Four turreted vessels have been built in the navy y&rds of wood and cased with iron, differing therein from the original monitors, which ate exclusively of iron. One of them, the Monadnock, now in commis sion* has performed her trps from Boston to Hampton Hoads with entire satisfaction, giving assurance that this experiment, deviating in essential respects from others, is Jifeely to be succeseful. The draught of water of the Monadnock is twelve feet, and with two inde pendent screws she ha® aspeed of ten knots. Four other similar vesßela, of a still more formidable and in vulne* rable character, are building. The only sea- going iron-clad ships, besides the two turreted vessels already mentioned, are the Hew Iron sides* built in 1862; the Boanoke, one of the old frigates Which has been armored, and the Dunderberg, a cate mate vessel. For this vessel the contractor has promised a speed of fifteen knots at sea. lbo Department has, on several occasions, invited propositions for iron, sea-going, armored shins, but Con gress having declined to make the necessary appropria tions, no measures have been taken for their construc tion. The vessels recently built, and at present constructing In the navy yards, are of wood, the smaller clans of them being gunboats, eight of which are of the class of the Bipsic* of 600 tons, mounting one heavy pivot and four broadside guns. There are four of the class of the Bantncketj of SCO tons, mountingone heavy pivot, with six broadside guns. In addition to these there are four vessels of the class of the Algona, with a tonnage of 1,360 tons, and proportionate armament. All of these vessels have very considerable steam-power, and will, as some of them have already proved, be efficient crui sers at sea. - The immediate wants of the blockade having been supplied by the vessels built and altered in the navy yards, and by purchase of the best merchant steamers capable of bearing heavy armament, the attention of the Department has been bestowed on larger and more imposing rhips, such as would be formidable not only for home defence but for foreign service. The position and Influence of a nation among the great commercial and maritime powers of the world are to a great extent dependent on its naval ability. Limited appropriations have already been made by Congress for vessels of thfs ebaraster. Bach succeeding year of this war has pro duced from foreign ship yards steamers of greater speed to run the blockade, ana the reliable preventive of this Illicit trade must be found in vessels of increased steam power. By making them of sufficient size they will be formidable, not only to neutral violators of our laws, but to an enemW Of the vessels os which some sacri fice of armament has been made to obtain speed there are. seven buildinr, three of which are already launched, and the others will soon be ready. Two of these vessels are being built by contract, and five in the navy yards. This class of vessels is represented by the Ammonoosue ana the Chattanooga. There are also In progress of construction twenty vessels with steam ma chinery of rather less power, but which are to be much more heavily armed. -Ten of these, of the class of the Illinois, the Guerriero, and the Java, have covered gun-decks* and will carry twenty heavy guns. Two will have a plating of thin iron as a protection from shells. The remaining ten, of the class of the Gontoo cook and Manitou, building in the navy yards, are of less size but with equal machinery and intended for speed. As all of them will be provided with 'masts and sails, they can be .cruising vessels and used on foreign stations. STBAjr JUCiriXERT. As our navy has become not only exclusively a steam navy, but a very large one, with an enormous consump tion of coal and great expenditure for the construction and repair of machinery, it becomes a matter of the fi c st consequence that only the best machinery be ob tained fox it. This problem is one of very difficult, cost ly, and alow solution. The great maritime countries of England and France have not yet solved it. either iu the commercial or war marine, and at tins hour the best authorities do not agree upon it. So many conditions enter into the problem that, as promin enc 9 is given more or less to one or the other,'different conclusions are reached. It is evident that as the question is purely a practical one, it can only be answered by extensive ex perience and accurate observations. Mindful of the im portance of this matter, the Department, notwithstand ing the great pressure upon its* resources by the war, has kept it in view, and promoted hy every means the acquisition of ihe necessary information. The propor tions of hulls have been varied with a view to deter mined the relative development of speed in proportion to given power; machinery haß been constructed upon different types and systems, and the Department has encouraged all offers from citizens, as well as from its own officers, to build sew machinery that gaTe promise of improvement. The navy at this moment contains marine machine? on an extensive scale- of every kind; their results are in its log-books, from which can be determined their various merits, both, for general ser vice and for particnlsrapplicaiions. • In the new screw gunboats machinery has been used -designed by Gorless, of I.; J, Ericsson, of Slew York; William Wright, ol Woodruff & Beach’s establishment at Hartford; Merrick & Sons, of Phila delphia* and the Bureau of Steam Engineering of the Department. This was competitive machinery to be of equal power propelling the same hull. In the double-bowed paddle-wheel steamers ma chinery has been employed designed by Merrick & . of piiiiadpiphfrt,»Tvr , B r Pfckerson. and by the In thejaree .loops-of-war, of tire* tkrasandiioaT and over, competitive machinery Is being placed ly the Ahompaitiee, and.by J. Ericsson. - t .ln I*? frigates, an,d floow of tha old naxy, jand in some of those fcmlt daring the early part of the present Administration, machinery was employed designed hy hm® l “f the principal establishments in the country. The Felton Iron Works, and Morgan Iron Works, of Hew York! Messrs. - Woodruff & Beach, of- Hartford, Connecticut; Harrison Loring, and the Atlantic Worke, of Boston: Merrick & Sons, of Philadelphia; the Tnl can Works, of Baltimore, and the Bureau of Steam Engineering.. . In these vessds nearly every variety and type of en gine, of valve gea% of rate of expansion, of surface condenser, of screw 4 propeller, and of boilers, have been thoroughly tested; but the results thus far show that the machinery designed by the Steam-Engineering Bureau of the Department has not been surpassed, • perhaps not equalled, by any of its competitors, while In many cases theur results have been gratly below it. . Ik its iron-clads the Department has experimented by the construction of different classes and sizes, both in wood and iron, propelled by one screw and by two screws, working independently of f ach other. In its most recent constructions, of the Miantonomah class, a wooden vessel designed by the naval constructors and built at the navy yards, with Ericsson turrets, and machinery designed by the Bureau of Steam Engineer ing, a high rate of speed, perfect ventilation, impregna bility, and the enonneus battery of four fifteenTnch guns, have been combined in a vessel of the moderate size of 1,664 tons, drawing only twelve feet of water. These vessels are free from the disadvantage of foul ing, which so greatly reduces the speed of Iron ones. Others of this type, but of increased tonnage, are in process of construction, to have still higher speed and ve adapted to coast service. 0 In the steamers bought from the commercial marine t the country, and in the captured blockade runners, now adapted for naval service, are to be found event variety of machinery, both screw and paddle-wheel? constructed eitherin this country or Great Britain. So far as the exigencies of the war would permit, the dif ferent types of machinery have been submitted to care ful experiment to ascertain their relative merits. Near ly every variety of boiler and of expansive gear,, of rate of expansion, and of-saturated and superheated steam, has been made the subject of accurate experi ment. and ills believed that the files of tbe Department contain the latest and most reliable information on these subjects. A chief engineer of the navy has been. sent to Europe to collect information on these topics in addition to the published accounts and official reports. Nearly all the kinds of coals of the seaboard States have been the subject of careful experiment, with a view to ascertain their comparative value for naval “purposes. A board of engineers has also experimented with petroleum as a substitute for coal in naval steamers. As opinion appears to have settled upon the horizontal and the vertical tubular boilers as the only ones proper for naval service, the Department has had one of each kind manufactured, according to designs furnished by a board of nine engineers, employed in the principal private steam-engine manufacturing establishments of the country, and by the Bureau of Steam Engineering, for the purpose of accurate experiments to determine their respective merits. These experiments will be of the most elaborate nature, and will, it is presumed, enable a choice to be made. They are now in progress. A commission of nine, on practical engineering, has been appointed by the Department, consisting or three from the Academy of Science, three from the franklin. Institute, and three on the pari of the Department—all eminent m physical science—to devise the proper ap paratus, and make the necessary experiments there with, to ascertain by practical results the economv of using steam with different degrees of expansion- These experiments, which are now In progress, will be as elaborate and as complete as it ispossible to make them. And under-the practical conditions of steam engineer ing, it is believed they will indisputably set at rest the amount of gain to be obtained from using steam with different measures of expansion, and also determine the relative merits of different kinds of valve gear, steam-pressure, &c., besides settling many incidental questions of great importance. Nothicghas been left undone in the way of ascertain ing and putting in use all valuable improvements in steam machinery, and no ociasion neglected of experi mentally determining the data necessary for correct opinion. - , togiaeSMid boilers mow under con wi&beofgreatpobiicttlillt7. rIUSII »»** XAVY YARD FOR 1E027 VESSELS AND MACHINERY. " The introduction of steam as a motive power for naval vessels, is causing a revoiutton in maritime warfare, Which the ablest minds have longfpredicted would be the result of this agency, but which is not yet to its fulleit extent appreciated It changes the whole cha racterofblockade, and in future wars it win be found that a few fast privateers by steam will harass or anni hilate the commerce of the most powerful belligerent nations. Our country has been compelled by this civil war to take the initiative in organizing avast steam navy with which to establish ana enforce the blockade of our whole eoast'f rom the Chesapeakeßay to the Bio Grande; and also to suppress the depredations of serai-piratical privateers, bout by skilled English mechanics in Eng lish ship-yards, and manned by Englishmen, which, under the rebel flag, have roved the ocean, destroying onr merchant shipping, and have found refuge and sup plies in English and neutral ports. 'When hostilities commenced, our Government had provided no suitable navy yard with machine shops and foundries to manufacture the necessary machinery for our rapidly increaeiogi&nd expanding navy; but the Department wasoompeired to rely on the_few private establishments which it could divert from other en gagements, for the immense work that was calling out the resources of the nation. Great embankment was experienced in consequence of this neglect of the Government at the very com- ■ meneement of the war, and although the naval service end the country are suffering constantly from this ne glect,fmeasures for the establishment or a suitable navy yard for the construction and repair of iron vessels, their armature ana steam machinery, are-still delayed. As early as March, 1862, and on several occasions since, 1 have had the honor to present my views to Con gress on this subject. The earnestness and frequency with which it has been brought forward must find an apology in its great importance. It has never boon the purpose of the Department, in any of life suggestions or recommendations, to increase the number of our navy yards, nor to alter their local t distribution. The yard which we now have at Phila delphia Is altogether inadequate to our pretent or future wants. It was proposed, therefore, to substitute a new one on the Delaware, in the vicinity of Philadelphia. League Island, within the limits of that city, if adopted as a site, must gradually absorb the works at the pre sent yard, which would then be-discontinued. All of our present navy yards,it will be remembered, were established for the construction and repair of wooden sailing vessels. Steam and armored vessels have superseded these, and the inability of our present eitabllsnments for the work imposed by this war has been the source of inexpressible anxiety, and often of great disappointment and public injury. To relieve the navy yards from work which they have bat limited means to'execute, and to secure necessary repairs, the Department has been compelled to establish stations for machinery, and means of refitment at Mound City, Memphis, New Orleans, Ship Island, Pensacola, Key Weit, Pori Royal, Beaufort, Norfolk, and Baltimore. But these and all the private establishment of the country, Insides other calls upon them, have been in sufficient to keep the present navy In necessary order, so that, if to the duty of biockadingtoere were added ocean conflict* with a naval power by which our ships would be often disabled, the sad spectacle would be presented of our naval vessels laid up in. time of war for want of a proper establishment with the shops and means to repair them. Onr country, whose strength and power among na tions must ever he identified with and maintained by its of creating and außtalningono, has not, in all the navy yards combined, the appliances possessed by single es tablishments in England and Prance. Were there out side of our navy-yards establishments to perforin promptly the requisite work in time of war, I should not at this time again press the subject of a navy yard for Iron work for the construction of vessels upon the consideration of our authorities. But although the Da- - partment has generally been ably and zealously second- “ ed in its efforts by private contractors, yet the fact that there is no customer butthe Government for.much of* this heavy class ot iron work, forbids ua to expect that ; ia«ivi<in4 enterprise wWf* prepared- ty sweats it ration. * Besides this,.nnliimted time is for the completion of the work. It may mention, as an instance of thedmav to WBicns-ttw w vprnmGnfc ia subiectcd* that in October* 1962* centrac*- we?e made with a manufacturer of reputation and ability for making and. setting urn the Tonawanda and Sliantonomah- which ware to haTe been completed in February, 1863, My not be flniehed until Febraary,lB6s, two years arror the expiration, of the time specified in theconiiract. At the commencement of hostilities this Depart™ equipped, and at itsimmediate disposal, throe VMSrta of war. Those which were laid »P and those which were recalled from abroad had to undergo cate nsiye re pairs, for which noprorision had been made. The Qo veramenfc kas not'even st this time an establishment where a shaft can be made for our steamers or a plate for our lron-clads. The frontage or wharfage at all our navy yards, so important for repairs, is leas thsn ia re quired at each of them. ~ , _Our next contest may be with a naval power which Will attempt to direct upon our shores a course of opera tions Bimtla r to those which we have applied to the Bonthern coast for suppressingthe rebellion. One yard, at toast, where iron vessels, iron armor, and iron shafting can be manufactured, is now imperatively necesi axy. Among tbe considerations that should con trol the selection of a site for such a yard and establish ment, which shall beoome the depot for the material* collected In yearn of Deace with which to build and re pair our naval vessels, and where will be aggregated machinery and tools such as at present am not to be found in this country, and which, when once procured, could net, if destroyed* be easily or readily replaced, will be Sts absolute safety from attack by sea or land. So far as Is possible we should avail ourselves of natural advantages in obtaining the indispensable se curity for such an establishment, without depending entirely on fortifications and artificial means* which would be more costly than thejiavy yard Itself. The additional military defences of Portsmouth, England, rendered necessary by the proximity of that p®** naval station to the ocean, and its consequent *£? . j by modern, ordnance* are now being con structed at an expense of $50,000,000. .A® V **■“. if we, have one for naval iron work, should be established on fresh water, for this is essen tial to the preservation of iron vessels, which cannot be Ul> 4,1 Sait water during peace. Heady access to timber ig also important, for these es be always available on the !u - exposure to an enemy by coast 3L«? f ,P o:rta *ion..The vicinity of a large city where fiflSoimS 8 * 1 !? can be obtained w ithonf difficulty, and. ice faculties of markets and tenements are abundant, ««^ Blder p A foundation of gravel would, a« wPfifposes of machinery, be preferablO-to stone. m “ Bt fteo be secured. For such a depot and establishment, where costly machine ry and- material would accumulate during year® of location are moat manifest These favorable conditions are to be obtained nowhere etoe so completely as on tbe Delaware river: and the position of League Island, witbin the limits iof the city of Philadelphia, presents probably a stronger combination of the points that are necessary than any other location. It to to beregretted that competition for supposed local benefit® ehouid interfere with, retard, and perhaps en tirely defm the Government intis efforts to secure *o important a national establishment. If In such a con lUct for sectional favor the country should lore forever the best situation for such a navy yard and establish ment, the result would be always deplored. The De partment has studiously avoided the controversy which has arisen in consequence of the efforts to secure a navy yard at New London, which is foreign te the question or enlarging or substituting a more commodious es tablishment at Philadelphia. A multiplicity of small yards, simiU r in character, crowded into one section of the country, was not the object or purpose of the De partmeat lathe suggestions and recommendations which It has from time to time urged upon Congress. There are already three navy yards east of the Hudson, and should CoEkress deem it advisable to add another to that section or elsewhere, it to to be hoped that each de termination will not interfere with or prevent the Go vernment from harißg a proper establishment for the construction of iron vessels, iron armor, and iron work of every description for naval purposes in the immedi ate vicinity of the iron and coal region of the more cen tral portions of the Union* Such an establishment as the Department has advised oh tbe Da!aware would not add to the number of yards,-but woold be a mere substitution, without one dollar’s expense to the Go vernment for land, of the more commodious and exten sive grounds and water front of League Island, in place of the present limited and restricted sice at Philadel phia* which is wholly inadequate and insufficient for the purposes of a yard for even wooden ships. Among the reasons whichimpelme agatu to introduce this subject and earnestly press it upon the immediate attention of Congress, to the fact that the great Penn- Bjdvania Central Bail road has moved with a view of obtaining a portion of the least valuable part of League island for a depot. The objections urged against that position for a navy yard, with its workshops* have no weight with this company, which requires shoos and heavy work, and knows its own interest. Unless, therefore* this free gift of over six hundred acres of land, with a water front of twenty three feet depth ex tending for more than two miles, within the limits of Philadelphia, should be accepted daring the present session of Congress, it will probably pass info private hands, and the most desirable and available position in this country for such a yard will be diverted to other purposes, and lost forever to the Government As a measure of ordinary prudence it is most earnestly re commended that tbe offer of League Island be without delay accepted. When plans for its improvement shall be submitted, and an appropriation asked, with a view of transferring the works at the present yard to the new location, Congress can then exerciße Its discretion in determining the amount of expenditure proper for this purpose. By an set of Congress, approved June SO, 1864, the Secretary of the Navy was * and empower ed to appoint a commission, consisting of one naval offi cer, one officer of the engineer corps,' and one civilian, to select the most approved site for a navy yard or na val station on the Mississippi river, or upon one of its tributaries, and to report to the next session of Con gress.” In pursuance of the authority conferred ou me.by this act, a commission has been constituted.and is now engaged in making the required examinations. Hear Admiral Charles H. Davis, who has had experi ence as commanding officer of the Mississippi squadron, was appointed senior member of the commission The Secretary of War having been requested to name a-suit ableofficeTOf the engineer corps to be associated on this commission, and having named and detailed Lieu tenant Colonel A. H. Bowman for the purpose, that officer was appointed. George W. Blunt, a civilian of nautical and ability, of the city of New York* is the third gentleman of the commission. KAYAL RAKE. There is in the naval branch of the public service no rank corresponding with that of lieutenant general. Congress has established the grade of rear admiral. Which corresponds with that of major general, and it would be an act of recognition eminently deserved, and which would he fully appreciated by gallant men of the navy, were Congress to authorize the appoint ment of a vice admiral. Such honors and preferments stimulate heroes. Among eminent commanders in our naval service, of whom the nation may wellbe proud, we have one who, all will acknowledge, merits by his 'achievements as high rank as that of any naval officer in any country. On the occasion of the'recent brilliant victory in the bay of Mobile, more glorious, perhaps, in some of its incidents, even, than the memorable conflict that gave us the possession and ultimately restored the free navi gation of the Mississippi, it was, beyond question, the spontaneous sentiment of the country, that the veteran hero who had. illustrated out naval annals by these grand successes was worthy of the highest honors* and should be promoted to the highest naval rank. In recomnwnaiag, therefore, that the office of vice ad miral should be created,; and the appointment con ferred on Bear Admiral David G. Farragut, I but re spond , as I believe, to the voice and wishes of the na val service and of the whole country. . The attention of Congress, through the Naval Com mittee, has heretofore been called to the fact that the number of officers on- the active list In the grades of different rates required by law to be commandecLbir omcez&of these grades. A small increase was recom mended, as well as an alteration in the law relative to : filling vacauciesinthe grade of admiral in time of peace. My totter on this subject, with the accompanying draft or a mil, making provision also for the incorporation into the regular service of a few volunteer officers who, ttero&TS this report. ENLISTMENT, The enactments of the last session of Congress in re- Sard to enlistments have been in their operation beue cial to the naval service, and in-a great degree have corrected the unfortunate legislation of the preceding session,, Not only the full complement of men required has entered the service, hut a surplus of many thou sands of landsmen have offered who could not be re ceived. Butthe want of seamen is still felt. • Large numbers of that valuable class were induced to enter the army when high bounties were given to the soldiers and withheld from the sailors. Many thousand trained seamen, under those extraordinary inducements, en-. Dated in the army before the legislation for the two -branches of the public service was equalized. Although the law now authorizes their transfer to the navy, a very considerable portion of them still remain in the army, where landsmen would he of equal service. Sea men are experts, and cannot be procured by draft, or secured for an emergency like the present, any more than engineers or accomplished gunnery officers. Stimulated by patriotic impulse, men may volunteer to serve their country in any capacity, but they cannot be made available as seamen without training and ex perience at sea. - The organization of a man-of-war is very different from that of a merchant vessel A first* rate sailor wiH coon make himself at home on board of any ship; but the division of duties—the system of natty officers—the exercise at quarters and in boats—the discipline, the observances, and the thorough and complete system of a man-of- war, are unknown out of naval ships. There are no means by which to teach landsmen to become sailors except on shipboard, and there is difficulty in in tracing native Americans to enter either the naval or merchant service. In other countries the field of ad venture is restricted; here the avenues are* many, besides ocean life. lam not aware that any State but Massachusetts has a nautical school; Encouragement is given to the young in ©very other calling; but the naval §nd merchant service, in time of peace, depend almost entirely upon the foreigners and the homeless for manners to sail their ships. These men, who hard ly touch the shores without finding themselves the vic tims of land- sharks, and who scarcely receive a thought In the vast and generous sanitary operations, put in motion by Wealth and beneficent patriotism, have en riched qut country by their labors in commercial em ployments; and fn danger; privation, and hardship, nave adhered with unwavering fidelity to the flag— never disappointing us, and never giving us defeat. With a view of doing some measure of justice to this meritorious hut too much neglected class, and as a pre liminary step towards their elevation and usefulness, the Sabine has been fitted up for the purpose of a school . dup tar boys. This is, in fact, a revival, with some modifications,- of the apprentice system, which, while it was continued, worked beneficially for the sailor and the country. Some measures are requisite to elevate the condition and the character of this class now, when the sailor Is neither flogged nor taught to become a drunkard—two important steps in the right-direction towards making him a man to be trusted on shore as well as afloat Commencing as apprentices on the school-ship, it would be well to open to the sailor boy the way to pro motion by giving him an opportunity,if he shell deserve it, of entering the Naval Academy. From among the apprentices on the school-ship a selection of one-half or the midshipmen annually appointed might be made with great advantage to the service and the! country. training on tis aptitude for the profession, and in transferring them to the academy there will not be the manifold errors which attend so large a portion of those who are appointed tm. der the preient Bystem. Were each Congressional dis trust authorized to place two or more apprentices on tha school-ship, and the annual selection of midshipmen, or one-half of the midshipmen, directed to he madefrom these apprentices, its effect would he most henafleient of, tie sailor, as well as the schools and the service. It wooli popularize i'OJ navy, and open to thoso who may have emitted the highest positions and boners of the service. 1 NAVAJi ACADEMY. Congress having, by the act approved May 3b ISfSI, directed that ‘ * the United States Naval Academy shall he relumed to, and established at, the Naval Academy grounds in Annapolis, in the State of Maryland, before the commencement of the academic year eighteen hun dred and sixtyv five, ’ * it will be necessary that prepa rations should be commenced for putting the buudings and grounds in i order ae early in the ensuingrspring as toe War Department can, leave them. The school and the service will be benefitted by having the institution permanently established, and when this is effected it will be eu abled to pursue its career under clrcumßtancss more favorable to the efficient training of the midship *?&?• . * The able superintendent,Commodore GeorgeS.Blake, has preserved his connection with toe school during its unsettled state, and its management, under many dis has been creditable to Mm and his asao- CADET ENGINEERS, Prelhnlnary measures have been taken to carry Into effect the law of the last session of Congress authorizing the education at the Naval Academy ol cadet engineers, to be selected from youths not over eighteen years of age, who shall have been engaged at least two years in the fabrication of steam machinery. A,circular has been issued and printed in toe papers of the great ma nufacturing cities, inviting applications in conformity to toe law. \ ■ Before this plan shall be put In operation, it is re spectfully submitted, in view of the radical changes which have been wrought by steam as a motive power for naval vessels, whether steam-engineering should not be made to constitute hereafter a necessary part of toe education of all midshipmen, so that In our future «very Uae officer will be a steam-engineer, and qualified to have complete command and direction of hla ship. every vessel of-war must be a steam-vessel. Those designed for oceau service will he funished with sails in order to economize fuel while ciuiring; toe present and future navy.wili therefore combine sails and steam as motive fpower*. aud sea manship and steam-enclne driving will each bonecet sary to make toe finished professional officer. The officers to sail and. nayigate a ship and toe officers to run toeeteam- engine are about equal in number. The Department is not aware that any line officer, Whatever attentionm&y have been given by him to the theoretic study ©f steam, is yet capable of taking charge of an. engine, nor are steam-engine drivers capa ble?/ taking charge of a man-of-war, navigatingher, fighting her guns, and preserving her vesselb were propelled exclusively by sails, there were buttwo officers, excepting in flag-ships, the'surgeon and paymaster, who were not line-officers. Bat under the present naval system a new and additional corps ie introduced, as many steam-engineers being required for a vessel as there areline*officers; and, while cruis ing under sail, or lying in port, or performing any duty when toe engine is at rest, one-half of the officers are, by existing regulations, idle and incapable of yar ticipatinffin duties that are often laborious and oppres sive on the officers of the line, comparatively speaking. The engineers Would willingly share these duties were they acquainted with them. But half the officers of a steamship cannot keep watch, cannot navigate heivcan- * not exercise the great guns or small arms* nor,, except as volunteers under a line-officer, take part in any ex pedition against the enemy. On the other hand, the other half of toe officers axe incapable of managing the steam motive power, or of taking chart© of the> engine room in an emergency, nor can toe commander of a vessel, though carefully taught every duty of a sailor and drill-officer, understand, tof his own -knowledge, whether the engineers and firemen are competent or The remedy for all this is very simple, provided the principle were once recognized and adopted of making our o fficers engine drivers as w ell as Bailors. It woald not be expedient to interfere with the .present status of line officers or engineers-the cbange would be too radi cal; but we should begin by teaching each midshipman to be able to discharge the duties of line officers and steam-engneerp. To combine the - two in one proto*. Sion, Bothatofficereio educatedtoan take their \rS alternately in the engine room and on deck. * • [ ‘Objection mt to Siato that toe duties wredi^iiaUar, and that driving is & specialty. The du des are r ot mow dissimtiartnan Mamaush*pattd gun nery. “When seamanship was the only education frtvert to an officer, it was not believed he oouM ever team .to teach sailors to drill, and a eerreantofjaarittes per formed the duty which is now so admirably aiacuarged by the graduates of the Naval Academy. When gunnery became a specialty, it was inconsiderately anaaawise ly proposed to have a corps of ordnance officers engrafted upon the naval service, a Beparate organization, which should draw to itself the knowledge so necessary to € avh, and therefore proper to be distributed amongst all the officers. ' M t Fortunately, our .naval officers are taught seaman ship, gunnery, and the Infantry drill, service thereby saved from distinct organizations jut these re spects, which would Inevitably hava Unpaired its effi ciency. It only remains to commence* at this time, and as preparatory to the future of the navy, to teach the midshipmen steam -engineering, as applied to making the engine. This would be incUmmdent ©f the art of designing and constructing, which is purely especial ly, wad nowise necessary in the management anddi rectioE of the ship. M And to this specialty, ae a highly scientific body 01 officers, would the present corps of engineer be always reqnlred.aa inspectors and con structors of machinery* the adoption of the sug gestions here made we shall, indue time, have a ho* IfSVppoLtments or expense- tonmereble other advantages com mend the Plan as worthy oftn&l, and it is presented for favorable The work ewi be commenced and carried forward a £ demy without any additional appropriation, ami the authority of Congress is invoked in behalf ot the sug gestion here submitted. PHIZES AND PENSIONS. The number of vessels captured by the sauadwns since the last annual report, and reported to the DepMj ment prior to November 1, is 5 24, classified asfollows, schooners, 106; steamers, 83; sloops, 40; brigs, S; barks*- S: small boats, 66, The total number of captures since the commencement of the rebellionis 1/879, vs*: schoon ers, 652; steamers, 267; sloops, 171; brigs, 83; barks, 29; ships, 16 5 yachts and small boats, 117. . ■ The gross proceeds arising from the sale of condemned prize property amounts to $14,888,260.51; expenses, 5L2&7,153.96; leaving for distribution, one half to the captors and one half to the United States as a naval pension fund, $13,190,8*1. 46. . # Annexed to this report is a table giving the names of vessels captured* date of capture, name of ssuturing vessel, &c. Also, a list of cases already adjudicated, showing the gross proceeds of sale, theexpense of con demnation* and the net amount for distribution. ~ m Ajointresolutionof Congress, approved ohthe Ist of July last, authorized the Secretary of the Navy to in vest so much of the naval pension fond as was not re quired for the immediate payment of the registered securitise of the united States. Under the authority conferred upon me I have invested five mil lion dollar?, as provided in the resolution, and on the Ist of January next there will be the further sum of SSMXO.OCO, which can be invested without interfering with the prompt payment of pensions. This amount will yield an annual income of $429,009, sufficient for the payment of the entire pension roll, ft affords me no little gratification to be able to state, that our brave offi cers and seamen, besides realizing handsome sums for. themselves,bave created a f and,the income from which wiU. doubtless, be ample for the payment of the autho rized pension to those who have been wounded, and to the widows and orphans of those who have been killed in the service, or died from disease contracted in the line of duty, without calling upon the national trea- St ?he pension roll on the Ist of November, 1864, was as follows; 769 invalids, with pensions amounting to • **; *550,40110 810,widows and orphans, amounting t0.*... 139.268 00 I,6o9persons, receiving a total amount 0f.*,., 189,659 10 In this connection I ask attention to the suggestions of the chief of the Bureau of Medicine and Surgery relative to naval pensions. The act of Congress approved July 11,1562, reiulating pensions, makes no provision for the new' grades of the navy-rear admiral, commodore, lieutenant commander, &c, —authorized by act of Con gress on the 16th of July of the same year. The act ahould be so revised as to include these grades, and it is suggested that a bette r adaptation of the a mount of pen sion tothe responsibility of the officer might be advan tageously made. The highest pay now authorized is thirty dollars per month, the family of a captain receiv ing no more than the family of a master commanding, and is a reduction of twenty dollars per month from the amount formerly paid. The act of Congress approved on the. 4th of July last provides that a person iu the “military service 0 who shall-losa both feet shall re ceive a pension of $29 per month, and those who shall lose both hands $25 permonth. Aa law is construed not to include persons in the naval service, those who hare suffered a similar loss in the navy continue to re • ceive but eight or ten dollars per month—an inequality Which it is believed was not intended. 1 suggest such changes in the law as will place the sailor upon the same footing as the soldier. FBIZE LAW. The seventh section of the act in relation to aban doned and captured property, approved July % 1351, revertes the law of prize as it stood prior to the present rebellion, and also as adjudged and applied since the commencement of the rebellion by the courts in their exercise of prize jurisdiction. It reverses also for'the future the public policy of the country upon the subject’, as manifested in the legislation of Congress both before the rebellion and since its commencement up tothe date of this act. This abrupt reversal of settled law and of public policy In regard to * ‘ property seized or taken upon any inland waters of the United States, by the naval forces thereof,*’ was not, I apprehend, wall considered, and does not appear to nave undergone discussion in either branch of Congress. Whether the words ‘‘ no property seized or taken upon any inland waters of the United States, by the naval forces thereof, ’ ’ comprehend not only cargoes, but vessels, may be quesvioned: but it can hardly be supposed that Congress intended to deny that naval vessels captured in naval conflict, as at New Orleans, or Memphis, or in Mobile bay, are the legiti mate Buhject of prize. The same is true also of trans ports, armed or unarmed, conveying the troops or mu nitions of an enemy, which may be captured. It sef ids Improbable that to deprive such captures of the character of prize could have baea deliberately intended. Uo the words “any inland waters of the United States” embrace the Cheep peaks and Delaware bays, the Bay of Mobile, and Bake Foachartrain? By the terms of this section, the naval officer seizing or taking property has the option either to send it into the courts or to turn it over under the act of March 12, 1863, to the Treasury agent. No one hut the naval seizer has this option. AIL other persons mast turn over their seizures to the Treasury agent. It is difficult to perceive the purpose for which this distinction is made. The property-seized is either liable to capture and condem nation as prize, or it is hot. If it be so liable, he is bound to send it to the prize court. Why, then, should he have authority to turn it over to the Treasury agent ? and if It be not so liable, why should the naval seizer alone be relieved from the obligation of sending it to the Treasury agent? If it be the object of the section to take away the cha racter of prize of war from all property which mav be captpred by naval forces on the inland waters of the United States, it is .respectfully submitted whether its repeal is not demanded by the highest considerations of public policy. The inland waters of the UnitedtStatea ccsstUute cruising stations of va>t extent, and are so situated as to be or supreme importance in the prosecu tion of this, or, indeed, of any maritime war. These waters offer the readiest naval access to vast amounts of commercial property belonging to those who are now waging war against the Government. The properly, both public and private, frond upon these waters and along their shores belonging to the enemy is. under the public law of war, liable to capture by naval bellige i Tents, and, when so captured, to condemnation as prize of war. By the exercise of this right, a naval force can iezch and capture property which should be taken from an enemy- and which is yet left uo touch ed by our statutes. Upon the inland waters within the insurrectionary region, j&r affording access to or egress from it, our na« operations. Why should the law inter reiie»ini'&o-p*iroi_. that part of the my of one of its primary belligerent rights? It Certainly could not have been intended to cripple the power of the navy, to cripple the enemy, or by law to hedge round and protect from capture and condemnation an enemy’s property. The service on inland waters is not less difficult, perilous, and harass ing than that on the sea. that there should be this dia-. crimination against it, nor has it been less useful country. Under the operation of this act no more of the pro ceeds of any capture go into the treasury than under the law of war, because the sixth section authorizes the allowance of a moiety to “ informers, collectors of the customs, and other person?,” as an incentive to “ vigilance in protecting the public interest.” In taking this moiety Jrom the officers and crews who make the captures, and conferring it on the informer or custom- house officer, the treasury and country are not benefited. Thr right to make capture or prize of war, in all places and upon all property, subject to the law of war, is one of the encouragements which maritime nations have extended to their navies in all time, and cure has been no exception until this enactment. The exercise 01 this right, in cutting off the resources of an enemy, is one of the chief methods by which nations seek to bring war to a close. There is no reason why is this war‘against the rebel lion an an cient and rightful proceeding should be aban doned, and a rule adopted' that must operate to our na tional Injury in all wars. I can see no reason upon which to conclude that in fighting down this rebellion we should reverse all previous usage and law, either as against the rebels themselves, or their abettors, or the property upon which they rely for their resources, or why, indeed, we should relinquish any one belligerent right. On the contrary. It will be well to preserve to our navy upon all the waters where it can float or fight all its rights of war unimpaired. With these views the expediency of a repeal of the 7th section of the act alluded to is recommended, and the substitution in its place of some proviaionof like effect to that which is found in the last section of the act upon the same subject approved March 12, 1583, CONTRACTS. .The present contract system is open to many and se rious objections. "Whatever may have teen its merits when established* the condition of the coun try anaof trade has so changed as to render essential modifications necessary, if not the abrogation of the system Itself. The instability of prices, and a rising marketduring the progress of the war, have inadefl difficulty and, in someinatances, almost impossible to procure offers for contracts to furnish yearly supplies for the navy from honest and reliable contractors at a rate 'which does not contemplate the highest market price of gold, as well as long delay in the time of pay ment. Any change for the better in the condition of the country or the market will be a gain to the contractor who has an annual contract, and a corresponding loss to the Government. A ipropppal made the present year for the annual supply of flax canvas, which is mostly imported, illus trates this point. The bids were received when ex change wasat nearly the highest rate it has attained, and from an honorable and reliable contractor who has for years supplied the Government faithfully. The ag- IgegJwoffer was, for payment in currency, or for payment in gold, or its equivalent, R t the time each bill was paid, $586,923. There was no alternative under the. law other than to accept the-cur rency bid, and as the rate of exchange has fallen, there J»as Been a corresponding: incroass of profits to tne con tractor. _ In this case.and others ol like character, tie true in terest of the Government would undoubtedly be pro moted -were tie Department permitted to assume the litk, and omit making annual contracts, relyine anon purchases as wanted, under the direction of the Depart ment, at the current market price. The Government Is seldom henefitted By a rise m pricas; for while: the laws compel its agents to purane a definite course of action, the contractor general* finds little diScnliy in evading penajties, and a losing contract is therefore abandoned. It is worthy of serious consideration whether, for the present at least, it. would not be for the true interest of the Government to relinquish the system of annual con tracts altogether, and authorize purchases to be made by agents prprobitv, whose fidelity and integriiy have been tested through years of faithful service, and who have a life• long commission as well as a character to lose as a penalty for malfeasance. *' Another source of embarrassment in procuring naval supplies has been the delay and uncertainty of pay ment Unless a definite time for payment is fixed, and bills are promptly met, or unless interest be allowed during the delay of payment, the Government will in evitably become a large sufferer. Many of; the best merchants in our principal cities, who have heretofore sought dealings with the Government, now decline ac cepting an order on any term*. _ „ . t , lthae never been the policy of this Department do ad vance money to its agents, and they cannot for this reason make each payments. Beqnisitions are drawn on the Secretary of the Treasury only for matured bibs, and every day s delay in the .payment,of a’fulfilled contract is a wrong and a loss to the holder, and of ulti mate serious injury to the Government As a conse quence, the Government is driven to other, and often less honest dealers, and is compelled to pay for subse quent purchases higher rates. Government, Instead of being shunned and distrusted for neglecting to make prompt pajment for value received, should, for its prompt pa* meats, be a favored Purchaser in any mar ket-enabled to deal with the manufacturer, or pro ducer at first prices, instead of with second and third hands. *, v If supplies are procured when wanted and as wanted, at the market price, either in open purchase, by an honest agent, or upon bids received for immediate de- - livery, withpromptpayment, immensesums would be saved to the Department and the Government. 1 I have heretofore referred toAs.e 'defects and abuses practiced under the existing laws of awarding annual contracts for naval supplies to the loweßt bidder. Whatever may be the character or reputation of the udder for fair and honest dealing, no discretion is given to any officer of the Government in the premises, nor can any officer decline the contract though it may be obviouß the bidder cannot furnish good articles at the prices which he proposes. - 1 Contracts are made under the operation of existing laws, uhleh eanndt be honestly fulfilled; and under the practice that has prevailed, the whole system has become tainted with demoralization and fraud, by which the honest ana fair dealer is too often driven lrom the market. Articles inferior in quality and defi cient in quantity are delivered and passed. Bribery and other improper practices are resorted to, to indace persons in the employment of the Government to aid in these frauds. Malfeasance on the part of officials in connection with the purchase and delivery of supplies was alleged to exist, snd with the purpose of investigating and bring ing such fraudulent practices to light, application was made to the War Department, which detailed ah officer to prosecute these inquiries. The result is that many and great frauds have been discovered. Proceedings have accordingly been instituted, and are now in pro gress against some of the parties implicated before mili tary tribunals under the statute, and against others in the civil courts. XSCRBASn OP SALARIES. In comequence of the greatly increased prices that" preveil, many who are in the clerical employment of the Government, at a compensation established prior to the a remuneration wholly insuffi cient. The state of the currency, with other causes, has so affected prices that these men are receiving rela iivelybnfcabout one-half the pay of former years, and the effect has been such as to compel many of the best clerfcß in this Department to leave the .Government ferries. This is a public injury, especially in a crisis like the present. The place of an experienced and ac complished clerk is at no time easily supplied; but when such place is vacated for the reason ihafcitis not remunerative* or that the pay is, below corresponding positions in private establishments, the difficulty is in creased. It Is, therefore, suggested that the salaries of the clerical force, or a portion of the clerical force, be increased until the close of the war, or until the cur rency shall return to a specie standard. This recommendation is made with some reluctance, and only under ft sense ofrits absolute necessity at this time. * - . - MASTER’S MATES. Whwithorftto of pay for mates was esta blished it was thought to correspond with that of other grades--but the changes in. currency and values which have since taken place rendertt difficult to retain in ser vice a sufficient number of this highly serviceable and
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