War of the Rebellion: Serial 128 Page 0538 CORRESPONDENCE, ETC.

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Second. The Government has already four steamers - the Giraffe, Cornubia, Merrimac, and Eugenie - engaged in running the blockade, and I have instructions to purchase the fifth. These steamers would have to lie idle or be sold if I were to turn over to you the purchasing and forwarding of supplies for the Ordnance and Medical Departments.

Third. Several of the principal articles are now purchased direct from the manufacturers, and I could not without positive instructions from the War Department increase the cost to the Government 2 1/2 per cent. by placing the purchasing in your hands.

Fourth. You have associated yourself with a house of high respectability, but entirely inexperienced in the purchasing of army supplies. Such business as I find it necessary to intrust to a commission merchant can be much better transacted by the house with which I have had very large transactions, which transactions have received the unqualified approval of the War Department. If you were connected with an army house, of which there are several in London, this objection would not hold good.

Fifth. To make any serious change in the conduct of the business of purchasing and forwarding supplies for the Confederate States Government, which has been successfully carried on since the war commenced, could not fail to be attended with inconvenience, if not loss, to the Government.

In compliance with your request that I should furnish you with my views on the subject of purchasing more steamers, I would suggest that no definite arrangements be made requiring the expenditure of more money until you have some information as to how much money will be at your disposal for the purposes of the War Department. The loan has proved a success, but as yet has not placed us in possession of any money whatever. I have a large account to pay, and have within a few days given out large contracts. Major Ferguson will require a considerable amount for his purchases, whether he makes them himself or intrusts them to you. It is of the highest importance that the orders of the Subsistence Department should receive proI would recommend if you have any money at your disposal that you appropriate it at once to that purpose. The Engineer Bureau also requires a portion of the funds available. With all these demands upon the loan, or that portion of it that may be placed to the credit of the War Department, I cannot but think it would be very unwise to make any further expenditure for ships. The difficulty that presents itself to my mind is, that even if no immediate embarrassment is produced with the five steamers you inform me you have purchased, of which the Government owns three-fourths, and with the four entirely owned by the Government, the available fund will not be more than sufficient to keep them all supplied with cargoes. And it seems to me highly probable that some of the three-fourths steamers may have to leave with small Government cargoes on board. This condition of affairs will answer very well for the one-fourth owners, but would hardly subserve the Government's interests. In view of all the difficulties in the case I would suggest to you and even urge you not to enter into any further contracts for ships until a definite understanding is come to as regards the money to be supplied to you for that purpose and for the purchase of the cargoes.

Since writing the above I have received instructions from the War Department which confirm me in the view I have taken of the case.