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The operations of the Treasury during the last year have been successfully conducted. The enactment by Congress of a National Banking Law has proved a valuable support of the public credit, and the general legislation in relation to loans has fully answered the expectation of its favorers. Some amendments may be required to perfect existing laws, but no change in their principles or general scope is believed to be needed. Since these measures have been in operation, all demands on the Treasury, including the pay of the army and navy, have been promptly met and fully satisfied. No considerable body of troops, it is believed, were ever more amply provided and more liberally and punctually paid; and, it may be added, that by no people were the burdens incident to a great war more cheerfully borne. The receipts during the year, from all sources, including loans and the balance in the Treasury at its commencement, were $901,125,674 86, and the aggregate disbursements $895,796,630 65, leaving a balance on the 1st of July, 1863, of $5,329,044 21. Of the receipts, there were derived from customs $69,059,64240; from internal revenue, $37,640,787 95, from direct tax, $1,485,103 61; from lands, $167,617 17; from miscellaneous sources, $3,046,615 35; and from loans, $776,682,361 57: making the aggregate $901,125,674 86. Of the disbursements, there were for the civil service $23,253,922 08; for pensions and Indians, $4,216,520 79; for interest on public debt, $24,729,846 51; for the War Department, $599,298,600 83; for the Navy Department, $63,211,105 27; for payment of funded and temporary debt, $181,086,635 07: making the aggregate $895,796,630 65, and leaving the balance of $5,329,044 21. But the payment of the funded and temporary debt, having been made from moneys borrowed during the year, must be regarded as merely nominal payments, and the moneys borrowed to make them as merely nominal receipts; and their amount, $181,086,535 07, should therefore be deducted both from receipts and disbursements. This being done, there remains, as actual receipts, $720,039,039 79, and the actual disbursements $714,709,995 58, leaving the balance as already stated. The actual receipts and disbursements for the first quarter, and the estimated receipts and disbursements for the remaining three quarters of the current fiscal year, 1864, will be shown in detail by the report of the Secretary of the Treasury, to which I invite your attention. It is sufficient to say here, that it is not believed that actual results will exhibit a state of the finances less favorable to the country than the estimates of that officer heretofore submitted, while it is confidently expected that, at the close of the year, both disbursements and debt will be found very considerably less than has been anticipated. The report of the Secretary of War is a document of great interest. It consists of First.—The military operations of the year detailed in the report of the General-in-Chief. Second.—The organization of colored persons into the war service.

Third.—The exchange of prisoners, fully set forth in the letter of General Hitchcock. Fourth.-The operations under the act for enrolling and calling out the national forces, detailed in the report of the Provost-Marshal General. Fifth.-The organization of the Invalid Corps. And— Sixth.-The operations of the several departments of the Quartermaster. General, Commissary-General, Paymaster-General, Chief of Engineers, Chief of Ordnance, and Surgeon-General. It has appeared impossible to make a valuable summary of this report, except such as would be too extended for this place, and hence I content myself by asking your careful attention to the report itself. The duties devolving on the naval branch of the service during the year, and throughout the whole of this unhappy contest, have been discharged with fidelity and eminent success. The extensive blockade has been constantly increasing in efficiency, as the navy has expanded, yet on so long a line it has, so far, been impossible entirely to suppress illicit trade. From returns received at the Navy Department, it appears that more than one thousand vessels have been captured since the blockade was instituted, ai. that the value of prizes already sent in for adjudication amount to over thirten millions of dollars. The naval force of the United States consists at this time of five hundred and eighty-eight vessels completed and in the course of completion, and of these seventy-five are iron-clad or armored steamers. The events of the war give an increased interest and importance to the navy, which will probably extend beyond the war itself. The armored vessels in our navy, completed and in service, or which are under contract and approaching completion, are believed to exceed in number those of any other Power; but while these may be relied upon for harbor defence and coast service, others of greater strength and capacity will be necessary for cruising purposes, and to maintain our rightful position on the ocean, The change that has taken place in naval vessels and naval warfare since the introduction of steam as a motive power for ships of war, demands either a corresponding change in some of our existing navy-yards, or the establishment of new ones, for the construction and necessary repair of modern naval vessels. No inconsiderable embarrassment, delay, and public injury, have been experienced from the want of such governmental establishments. The necessity of such a navy-yard, so furnished, at some suitable place npon the Atlantic seaboard, has, on repeated occasions, been brought to the attention of Congress by the Navy Department, and is again presented in the report of the Secretary, which accompanies this communication. I think it my duty to invite your special attention to this subject, and also to that of establishing a yard and dépôt for naval purposes upon one of the Western rivers. A naval force has been created on these it:terior waters, and under many disadvantages, within a little more than two years, exceeding in number the whole naval force of the country at the commencement of the present Administration. Satisfactory and important

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as have been the performances of the heroic men of the navy at this interesting period, they are scarcely more wonderful than the success of our mechanics and artisans in the production of war-vessels, which has created a new form of naval power. Our country has advantages superior to any other nation in our resources of iron and timber, with inexhaustible quantities of fuel in the immediate vicinity of both, and all available and in close proximity to navigable waters. Without the advantage of public works, the resources of the nation have been developed, and its power displayed, in the construction of a navy of such magnitude, which has at the very period of its creation rendered signal service to the Union. The increase of the number of seamen in the public service from seven thousand five hundred men in the spring of 1861, to about thirty-four thousand at the present time, has been accomplished without special legislation or extraordinary bounties to promote that increase. It has been found, however, that the operation of the draft, with the high bounties paid for army recruits, is beginning to affect injuriously the naval service, and will, if not corrected, be likely to impair its efficiency by detaching seamen from their proper vocation, and inducing them to enter the army. I therefore respectfully suggest that Congress might aid both the army and naval service by a definite provision on this subject, which would at the same time be equitable to the communities more especially interested. I commend to your consideration the suggestions of the Secretary of the Navy, in regard to the policy of fostering and training seamen, and also the education of officers and engineers for the naval service. The Naval Academy is rendering signal service in preparing midshipmen for the highly responsible duties which in after-life they will be required to perform. In order that the country should not be deprived of the proper quota of educated officers, for which legal provision has been made at the naval school, the vacancies caused by the neglect or omission to make nominations from the States in insurrection, have been filled by the Secretary of the Navy. The school is now more full and complete than at any former period, and in every respect entitled to the favorable consideration of Congress. During the last fiscal year the financial condition of the Post-Office Department has been one of increasing prosperity, and I am gratified in being able to state that the actual postal revenue has nearly equalled the entire expenditures, the latter amounting to $11,314,206 84, and the former to $11,163,789 59, leaving a deficiency of but $150,417 25. In 1860, the year immediately preceding the rebellion, the deficiency amounted to $5,656,705 49, the postal receipts for that year being $2,647,225 19 less than those of 1863. The decrease since 1860 in the annual amount of transportation has been only about 25 per cent. ; but the annual expenditure on account of the same has been reduced 35 per cent. It is manifest, therefore, that the Post-Office Department may become self-sustaining in a few years, even with the restoration of the whole service.

The international conference of postal delegates from the principal countries of Europe and America, which was called at the suggestion of the Postmaster-General, met at Paris on the 11th of May last, and concluded its deliberations on the 8th of June. The principles established by the conference as best adapted to facilitate postal intercourse between nations, and as the basis of future postal conventions, inaugurates a general system of uniform international charges at reduced rates of postage, and cannot fail to produce beneficial results. I refer you to the Report of the Secretary of the Interior, which is herewith laid before you, for useful and varied information in relation to Public Lands, Indian Affairs, Patents, Pensions, and other matters of the public concern pertaining to his department. The quantity of land disposed of during the last and the first quarter of the present fiscal year was three million eight hundred and fortyone thousand five hundred and forty-nine acres, of which one hundred and sixty-one thousand nine hundred and eleven acres were sold for cash. One million four hundred and fifty-six thousand five hundred and fourteen acres were taken up under the Homestead Law, and the residue disposed of under laws granting lands for military bounties, for railroad and other purposes. It also appears that the sale of public lands is largely on the increase. It has long been a cherished opinion of some of our wisest statesmen that the people of the United States had a higher and more enduring interest in the early settlement and substantial cultivation of the public lands than in the amount of direct revenue to be derived from the sale of them. This opinion has had a controlling influence in shaping legislation upon the subject of our national domain. I may cite, as evidence of this, the liberal measures adopted in reference to actual settlers, the grant to the States of the overflowed lands within their limits, in order to their being reclaimed and rendered fit for cultivation, the grants to railway companies of alternate sections of land upon the contemplated lines of their roads, which, when completed, will so largely multiply the facilities for reaching our distant possessions. This policy has received its most signal and beneficent illustration in the recent enactment granting homesteads to actual settlers. Since the first day of January last, the beforementioned quantity of one million four hundred and fifty-six thousand five hundred and fourteen acres of land have been taken up under its provisions. This fact, and the amount of sales, furnish gratifying evidence of increasing settlement upon the public lands, notwithstanding the great struggle in which the energies of the nation have been engaged, and which has required so large a withdrawal of our citizens from their accustomed pursuits. I cordially concur in the recommendation of the Secretary of the Interior, suggesting a modification of the act in favor of those engaged in the military and naval service of the United States. I doubt not that Congress will cheerfully adopt such measures as will, without essentially changing the general features of the system, secure to the greatest practical extent its benefits to those who have left their homes in defence of the country in this arduous crisis. I invite your attention to the views of the Secretary as to the propriety of raising, by appropriate legislation, a revenue from the mineral lands of the United States. The measures provided at your last session for the removal of certain Indian tribes have been carried into effect. Sundry treaties have been negotiated, which will, in due time, be submitted for the constitutional action of the Senate. They contain stipulations for extinguishing the possessory rights of the Indians to large and valuable tracts of lands. It is hoped that the effect of these treaties will result in the establishment of permanent friendly relations with such of these tribes as have been brought into frequent and bloody collision with our outlying settlements and emigrants. Sound policy, and our imperative duty to these wards of the Government, demand our anxious and constant attention to their material well-being, to their progress in the arts of civilization, and, above all, to that moral training which, under the blessing of Divine Providence, will confer upon them the elevated and sanctifying influences, the hopes and consolations of the Christian faith. I suggested in my last Annual Message the propriety of remodelling our Indian system. Subsequent events have satisfied me of its decessity. The details set forth in the report of the Secretary evince the urgent need for immediate legislative action. I commend the benevolent institutions, established or patronized by the Government in this District, to your generous and fostering care. The attention of Congress, during the last session, was engaged to some extent with a proposition for enlarging the water communication between the Mississippi River and the northeastern seaboard, which proposition, however, failed for the time. Since then, upon a call of the greatest respectability, a convention has been held at Chicago upon the same subject, a summary of whose views is contained in a Memorial Address to the President and Congress, and which I now have the honor to lay before you. That the interest is one which will ere long force its own way I do not entertain a doubt, while it is submitted entirely to your wisdom as to what can be done now. Augmented interest is given to this subject by the actual commencement of work upon the Pacific Railroad, under auspices so favorable to rapid progress and completion. The enlarged navigation becomes a palpable need to the great road. I transmit the second annual report of the Commissioners of the De partment of Agriculture, asking your attention to the developments in that vital interest of the nation. When Congress assembled a year ago, the war had already lasted nearly twenty months, and there had been many conflicts on both land and sea, with varying results; the rebellion had been pressed back into reduced limits; yet the tone of public feeling and opinion, at home and abroad, was not satisfactory. With other signs, the popular elections then just past indicated uneasiness among ourselves, while, amid much that was

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