I send you Dr. Derby’s acknowledgment that he gave the leave of absence of which he was charged.  I have placed him in arrest, in obedience to General Halleck’s orders, but he remains in charge of the Overton Hospital, which is not full of patients.

The State Hospital also is not full, and I cannot imagine what Dr. Derby wants with the Female Academy on Vance Street.  I will see him again, and now that he is the chief at Overton Hospital, I think he will not want the academy.  Still, if he does, under your orders I will cause it to be vacated by the children and Sisters of Mercy.  They have just advertised for more scholars, and will be sadly disappointed.  If, however, this building or any other be needed for a hospital, it must be taken; but really, in my heart, I do not see what possible chance there is, under present circumstances, of filling with patients the two large hospitals now in use, besides the one asked for.  I may, however, be mistaken in the particular building asked for by Dr. Derby, and will go myself to see.

The fort is progressing well, Captain Jenney having arrived.  Sixteen heavy guns are received, with a large amount of shot and shell, but the platforms are not yet ready; still, if occasion should arise for dispatch, I can put a larger force to work.  Captain Prime, when here, advised that the work should proceed regularly under the proper engineer officers and laborers.  I am, etc.,

W. T. SHERMAN, Major-General commanding.

HEADQUARTERS FIFTH DIVISION MEMPHIS, TENNESSEE, September 4, 1862

Colonel J. C, KELTON, Assistant Adjutant-General, Headquarters of the army, Washington, D. C.

DEAR COLONEL:  Please acknowledge to the major-general commanding the receipt by me of his letter, and convey to him my assurances that I have promptly modified my first instructions about cotton, so as to conform to his orders.  Trade in cotton is now free, but in all else I endeavor so to control it that the enemy shall receive no contraband goods, or any aid or comfort; still I feel sure that the officers of steamboats are sadly tempted by high prices to land salt and other prohibited articles at waypoints along the river.  This, too, in time will be checked.  All seems well here and hereabout; no large body of the enemy within striking distance.  A force of about two thousand, cavalry passed through Grand Junction north last Friday, and fell on a detachment of the Bolivar army at Middleburg, the result of which is doubtless reported to you.  As soon as I heard of the movement, I dispatched a force to the southeast by way of diversion, and am satisfied that the enemy’s infantry and artillery fell back in consequence behind the Tallahatchie.  The weather is very hot, country very dry, and dust as bad as possible.  I hold my two divisions ready, with their original complement of transportation, for field service.  Of course all things most