On the 22d of December, the President learned that 870 State bonds for $1,000 each, held in trust by the Government for different Indian tribes, had been abstracted from the Interior Department by one Godard Bailey, the clerk who had charge of them, and had been delivered to William H. Russell, a member of the firm of “Russell, Majors & Waddell.” Upon examination, it was found that the clerk had substituted for the abstracted bonds bills delivered to him by Russell, drawn by his firm on Floyd as Secretary of War, and by Floyd accepted and indorsed, for the precise amount of the bonds, $870,000. The acceptances were thirteen in number, commencing on the 13th of September, 1860, the last one of the series, dated December 13th, 1860, being for the precise sum necessary to make the aggregate amount of the whole number of bills exactly equal to the amount of the abstracted bonds. Bailey stated that he held the acceptances “as collateral security for the return of the bonds.”

What happened on this discovery should be told in Mr. Buchanan’s own words, as I find them in his handwriting, in a paper drawn up apparently for the information of some one who was entitled to know the facts.

I do not recollect the precise time when I had the only conversation which I ever held with Governor Floyd on the subject of your inquiry. It was most probably soon after Mr. Benjamin had the interview with myself, the particulars of which I cannot now recall; but it is proper to state that I learned from another source that acceptances of Mr. Floyd had been offered for discount in Wall Street.

When I next saw Secretary Floyd I asked him if it were true that he had been issuing acceptances to Russell & Company on bills payable at a future day. He said he had done so in a few cases. That he had done this in no instance until after he had ascertained that the amount of the bills would be due to them under their contract, before the bills reached maturity; that the trains had started on their way to Utah, and there could be no possible loss to the Government. That the Government at that time was largely indebted to Russell & Company, and the bills which he had accepted would be paid, when they became due, out of the appropriation for that purpose. I asked him, under what authority he had accepted these drafts. He said, this had been done under the practice of the Department. I said, I had never heard of such a practice, and if such a practice existed, I considered it altogether improper, and should be discontinued. I asked him if there was any law which authorized such acceptances. He said there was no law, he believed, for it, and no law against it. I replied, if there was no law for it, this was conclusive that he had no such authority. He said, I need give myself no trouble about the matter. That the acceptances already issued should be promptly paid out of the money due to Russell & Company, and he would never accept another such draft. I might rest perfectly easy on the subject. I had not the least doubt that he would fulfill his promise in good faith. He never said another word to me upon the subject. I was, therefore, never more astonished than at the exposure which was made that he had accepted drafts to the amount of $870,000, and that these were substituted in the safe at the Interior Department, as a substitute for the Indian bonds which had been purloined.

I took immediate measures to intimate to him, through a distinguished mutual friend, that he could no longer remain in the cabinet, and that he ought to resign. I expected his resignation hourly; but a few days after, he came into the cabinet with a bold front, and said he could remain in it no longer unless I would instantly recall Major Anderson and his forces from Fort Sumter.

There were, as Mr. Buchanan states, besides the acceptances lodged in the Interior Department, other acceptances of Floyd’s, as Secretary of War, afloat in Wall Street. Of course, Mr. Floyd was aware of this; and having been told by the President that he must resign, he boldly determined to resign on a feigned issue, making for himself a bridge on which he could pass over to the secession side of the great national controversy.

The arrival of the South Carolina commissioners in Washington on the 26th December, afforded to the Secretary an opportunity to concoct his impudent pretext. It is impossible to suppose that he believed either that Anderson had acted without orders or against orders, or in violation of any pledge given by the President. The orders were, in one sense, his own; and as to any pledge, he could not have been ignorant of what really took place between the President and the South Carolina members of Congress on the 10th of December. When he instructed Major Buell in the orders that were to be given to Anderson, the Secretary was, in giving those orders, loyal to the Government whose officer he was, and his conduct in regard to the acceptances was unknown to the President. When the South Carolina commissioners arrived in Washington, he was a man whose resignation of office had been required of him by the President. He learned that the commissioners were about to complain that Anderson had violated a pledge. Taking time by the forelock, he entered a session of the cabinet on the evening of the 27th, the next day after the arrival of the commissioners, and, in a discourteous and excited manner, read to the President and his colleagues a paper which, on the 29th, he embodied in a letter of resignation, that read as follows:

[SECRETARY FLOYD TO THE PRESIDENT.]

War Department, December 29th, 1860.

Sir:—