HEADQUARTERS OF THE ARMY,
Washington, D. C., August 25, 1862.

Major General WILLIAM T. SHERMAN, Memphis:

MY DEAR GENERAL: It was determined before I arrived here that gold and Treasury notes should be paid for cotton, and it was so published in orders by General Butler in New Orleans. Whether or not this is wise I could not stop to examine. The policy being adopted its operation must be uniform. Hence I directed General Grant to make it so in his district. I understand that tents for the new levies cannot be furnished till we get more cotton, and hence the absolute necessity of encouraging that trade just now.

Money is of no more value to the rebels than cotton, for they can purchase military munitions with the latter as well as the former. Very probably as soon as we get enough cotton for military purposes the policy will be changed.

I found everything here much worse than I anticipated. I am getting Pope, Burnside, and McClellan together, and I think our time of great peril is nearly over. We hope very soon to resume active operations.

I have had no time to attend to mattes in the West, and they seem to be going on badly. The administration is very much displeased at the want of energy in Buell's movements, and unless he does something very soon he will be removed. A part of his district has already been assigned to Wright, but he retains nearly all his old army.

As soon as they new troops are organized in the West the fall campaign will be opened there with energy. All we can hope to do for the next month is to hold our positions and prepare for an onward movement.

Yours, truly.

H. W. HALLECK,

General-in-Chief.

GENERAL GRANT'S HEADQUARTERS, August 25, [1862],

Via Cairo, Ill. August 28, 1862-8 a.m.

Major General H. W. HALLECK, General-in-Chief:

Scouts in from the front report all quiet. Rebels are getting out timber to build bridges. Think the main force has gone east, and has not stopped short of Virginia. One division sent forward is on forced march to Nashville. The other is pushing on to Decherd.

U. S. GRANT,

Major-General.

GENERAL GRANT'S HEADQUARTERS,

Corinth, Miss., August 25, 1862-9.10 a.m.

Major General H. W. HALLECK:

GENERAL: Colonel Mason, with portion of the Seventy-first Ohio, surrendered Clarksville to the guerrillas. Prisoners were paroled and sent down the river. I ordered them to Benton Barracks, and have put Donelson and Henry under command of Colonel Lowe, and have ordered six companies of infantry up to re-enforce him.

U. S. GRANT,

Major-General.