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DECEMBER 20TH, 1863.

DEAR SIR: Everything is quiet in the Department of the Gulf - and likely to remain so.
Gen. Weitzel was absent four days on his expedition, of which the object was to destroy the Rebel Gunboat " Cotton ", which was accomplished. Gen. Weitzel lost six men killed and 27 wounded. Loss of the enemy in killed, wounded and prisoners, about three times as much. I learned from Weitzel last night, that he undertook the expedition on his own responsibility and without the knowledge of Gen. Banks.
I hear from outside our lines, that the enemy are removing all the new troops from the Mississippi to Virginia, and replacing them with a greater number of veterans from the Virginia army. That they are throwing some of these veterans into the Teche country - placing some at Port Hudson, and are making every arrangement for a desperate defence of the Mississippi.
I regret to say that it seems to me Gen. Banks will not succeed here. He has accomplished nothing, even in making preparations. The universal wish (except from secessionists) is for the return of Gen. Butler. Even if all the accusations against him were true, he would accomplish great things of benefit to the country. He used to do more in three days than Gen. Banks has done since his arrival. This is the most important point in the whole country, and the most able man should be here. I thought things were bad enough when Gen. Butler was here, though I believe there was nothing wrong except toleration of speculators - but now, although there seems to be entire honesty, the situation and prospect is disheartening.
The "Avieto" has escaped from Mobile. Com. Prebie, you remember, was dismissed for permitting her to run in. She carries seven or eight guns, is not iron-clad, and is tolerably swift.
No military movements are going on, nor in preparation, so far as I can see
Gen. Banks declines doing anything for Texas. I asked him to send one regiment and a battery to Brownsville, capture the place - form a nucleus for refugee Texans - furnish them with ammunition and break up the immense trade between Mexico and the Confederate States. He declined. This trade is already very large, and is rapidly increasing. It extends down as far as San Luis Potosi. Enclosed are. copies of two important letters from the Consuls at Monterey and Matamoras. Please read them. This trade must be stopped; only a portion of it is through Matamoras - but it is absorbing the whole of Northern Mexico. A small force (perhaps 5,000 men) with plenty of extra cavalry equipments for the Texans, would accomplish it.

P. S. Gen. Hamilton and staff leave to-day for Washington, via N. Y.


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