The circumstances, I think, render it not invidious that I should especially refer to the management of the Baltimore and Ohio Railroad, where indomitable will, energy, and superior ability have been so often and so conspicuously manifested, and where such invaluable service has been rendered to the Government; a road nearly four hundred miles in length, so often broken and apparently destroyed, so constantly subjected to rebel incursions, that, had it been under ordinary management, it would long since have ceased operation; yet, notwithstanding all the difficulties of the severe winter season, the great disorganization of employees necessarily incident to a road thus situated, its most extraordinary curves, grades, bridges, tunnels, and the mountain heights it scales, it has moved this large force in the shortest possible time, with almost the exactness and regularity of ordinary passenger trains, and with a freedom from accident that, I think, has seldom, if ever, been paralleled.

At the end of the war, when the department's energies were devoted to getting itself as quickly and as thoroughly as possible upon a peace footing, it fell to me to examine the condition of the numerous railroads which the Government had seized and used in the time of active military operations, and to recommend what was to be done with them. This readjustment was not the least difficult of the complicated questions of disarmament. The Government had spent millions of dollars on improvements to some of these military railroads while operating them. My report was not finished till late in May, 1865, and as it contains much out-of-the-way information on the subject, and has never been published, I introduce it here in full:

Washington City, May 29, 1865.

Hon. Edwin M. Stanton, Secretary of War.

Sir: I have the honor to report that I have examined the subject of the disposition to be made of the railroads in the States lately in rebellion, referred to me in connection with the report of the quartermaster general, and the rules which he has recommended to be established. The second rule proposed by the quartermaster general provides that no charge shall be made against a railroad for expense of materials or expense of operation while it has been in the hands of the military authorities of the United States. In other words, he proposes to restore every railroad to its claimants without any special consideration from them for any improvements which the United States may have made upon it.

It is true in his fourth rule he includes past expenditures of defense and repair as an equivalent for the use of the road while it has been in the public service, but in many cases this does not appear to me to be sufficient. Our expenditures upon some of these roads have been very heavy. For instance, we have added to the value of the road from Nashville to Chattanooga at least a million and a half dollars. When that road was recaptured from the public enemy it was in a very bad state of repair. Its embankments were in many places partially washed away, its iron was what is known as the U rail, and was laid in the defective old-fashioned manner, upon longitudinal sleepers, without cross ties. These sleepers were also in a state of partial decay, so that trains could not be run with speed or safety. All these defects have now been remedied. The roadbed has been placed in first-rate condition. The iron is now a heavy T rail, laid in new iron the entire length of the line. Extensive repair shops have also been erected, well furnished with the necessary tools and machinery. I do not conceive that it would be just or advisable to restore this road, with its improved tracks and these costly shops, without any equivalent for the great value of these improvements other than the use we have made of it since its recapture. The fact that we have replaced the heavy and expensive bridges over Elk, Duck, and Tennessee Rivers, and over Running Water Creek, should also not be forgotten in deciding this question.

The above general remarks are also applicable to that portion of the Orange and Alexandria Railroad between the Potomac and the Rapidan. Very extensive repair shops have been erected at Alexandria, and furnished with costly machinery for the use of the road, and I understand that the iron and the roadbed are now much better than when the Government began to use it.

The same is still more the case with the road between City Point and Petersburg. When that road was recaptured from the public enemy not only was the roadbed a good deal washed away and damaged, but neither rails nor sound ties were left upon it. Now it is in the best possible condition. Can any one contend that it ought to be restored to its claimants without charge for the new ties and iron?

The case of the railroad from Harper's Ferry to Winchester is no less striking. It was a very poor road before the war, and was early demolished by the rebels. Not a pound of iron, not a sound tie, was to be found upon the line when we began its reconstruction in December last. We have spent about five hundred thousand dollars in bringing it to its present condition, and I have no doubt our improvements could be sold for that sum to the Baltimore and Ohio Company should they obtain the title to the roadbed from the proper authorities of Virginia. Why, then, should we give them up for nothing?