Kilbourn, Williams and Reed are well known to each other, were all interested in property at the termination of the canal, had been familiar with the policy of the canal and knew the power of the agent and commissioners, and any extra official act of the Receiver could have with them no other effect than a declaration of his opinion.How much Mr. Reed was deterred by the expression of that opinion, is shown by his subsequent tender of $3,000. And it appears by the prior and subsequent conduct of Mr. Kilbourn, that he had early discovered a simple mode of obviating any obstacle which the Recei ver might interpose by declining to receive the fund, viz: by so providing as to receive and expend it himself.

• But if it had been in the power of the Receiver or commissioners to thwart or defeat the operations of the Loan Agent, the committee will learn by the sequel how disastrous have been the consequences of the interference of the Receiver in this case.

About four weeks after the date of my letter to Mr. Williams, I received a letter from that gentleman in answer to my letter, in which he stated that he had no connection with or interest in the loan, excepting that the deposites were to be made in the bank of which he was President-that he would inform the Loan Agent of the objection raised by me to the loan-but regarded the difficulty, if any, of no consequence, as he was convinced that the contractor for the loan would not comply with his contract.

About the same time I

I then regarded the contract as a failure. received a letter from Mr. Kilbourn in answer to mine, full of bitter denunciations of my conduct, but giving no new information. Some time in August, Mr. George Reed tendered to me at my office $3000 in bills of the Illinois State Bank, in payment of bonds bought, as he said, of the Loan Agent, Mr. Kilbourn. I declined receiving the money-objecting, that the law required the money to be deposited in a bank, subject to the Receiver's order, and objecting to the kind of funds.

This is the tender of the $3000 alluded to in the report of the Loan Agent-a tender which that officer, in my presence, afterwards noticed as absurd.

It is not true, as stated in the report, that the contractors urged

me to accept this sum, nor do I recollect that I ever had any communication with any of them upon that subject.

I heard nothing further in relation to the results of the Ohio loan until the return of Mr. Milbourn, about the 23d of September, when I had two interviews with Mr. Kilbourn relating to the loan. Much conversation was had; he desired to know whether I had changed my views about the Ohio loan, and whether I could accede to the arrangements which he might yet make. I inquired as to the nature of these arrangements. I then learned, that the Cincinnati loan for $30,000 was contracted for by George Reed-that no part of the money had been deposited-that the only assurance of the ability of Mr. Reed to furnish the sum of $30,000, was his contract—that this contract was a condition of another contract, as I understood, between the canal company and Mr. Reed, as President of the Hydraulic and Manufacturing Company.

I asked whether he believed that Reed could furnish the $30,000, or any considerable portion. Upon being pressed on that point, he admitted that he did not think that Reed could obtain the money, but said that he might possibly procure $10,000-might not more than $1,000—but gave me to understand that his chief solicitude to get my consent to any arrangement which he might enter into was, by fulfilling his part of the contract to hold Reed fast on his contract.

I inquired how Reed proposed to obtain the money. He replied by drafts on friends in New York. I wished to know if Reed proposed to obtain the money by New York drafts-which drafts were better than specie-why the deposites on the loan could not be made in good funds. He replied, that Reed might wish to make the ex. change for himself. He had in the same conversation acquainted me with the payment by him of a bonus of 20 per cent. for the loan of $5,000 at New York.

In view of these statements of Mr. Kilbourn, the letter of Mr. Williams, and my knowledge of the pecuniary circumstances of Mr. Reed, I was satisfied in my own mind that he could not comply with his contract taking the loan; and I was equally well satisfied from the same evidence, that if he was able to furnish the funds, there would be no serious difficulty on the part of the Loan Agent in ha

ving the deposit made in proper funds. These convictions I stated to Mr. Kilbourn, but at the same time expressed my readiness to go as far as the law would permit in aiding any arrangements that could be made between him and Mr. Reed; but declined entering into any engagement until a distinct proposition was submitted.

Such a proposition the agent was not able to present, until he had ascertained what could be done with Mr. Reed.

We then parted with a good understanding as far as I observed; he on his part engaged to see Mr. Reed in order to make a definite proposition. I, on my part, engaging to consult the other commissioners, and to be governed by their views and the views of our mutual friends in deciding upon his proposition. Since that time the agent has had no communication with me on the subject of the loan.

In the conversation referred to, the Loan Agent stated some of the particulars of the several loans in New York state, and among others, that two of the loans made at New York city and Albany of $10,000, were made to personal friends; that he gave his personal guarrantee for the payment of the Albany loan; that he took care to have the money received on said loans deposited to his own order, so as to retain the control; and that the bonds had been endorsed to him by the purchasers, and were now held by him as trustee for them.

It is not true, as stated in the report, that I admitted to him, that the funds received on the loan were but from 3 to 5 per cent. below par at Milwaukee. But I did state, giving faith to his representations, that I believed the funds proposed to be received, might by proper management be converted into funds not more than 3 or 5 per cent. below par in Ohio.

In no conversation with the Loan Agent, did I intimate an opinion as to the legality of the loan at New York or Albany, nor did I manifest any design to decline to expend the proceeds of the loan on the canal, in case the certificates of deposit were delivered

to me.

I now proceed to examine another charge of the Loan Agent. The charge is, that the commissioners have been guilty of a wilful violation of law and shameful disregard of duty, in failing to make

provision for the payment of the interest on the bonds sold, by calling in the interest from the purchasers of canal lands.

He has endeavored to fix upon the commissioners the odium of pursuing a deliberate design to discredit the acts of the Loan Agent and to dishonor the faith and credit of the Territory. The law providing for the payment of the interest on the loan, reads as follows, viz:

"That whenever any loan shall be negotiated by the Governor in pursuance of any of the acts in relation to the Milwaukee and Rook river canal, it shall be the duty of the Board of Canal Commissioners so to fix the time when the first payment of the interest due or to become due from the purchasers of canal lands shall be made as to meet the interest semi-annually accruing on said loan, and to give three months notice thereof by publishing," &c.

The object of the law is simply to secure the payment of the interest due on the loan out of the interest due from the purchasers of the lands.

When the law was framed it was supposed that the entire loan of $100,000 would be made immediately; the whole amount could be negotiated more readily than a portion thereof; and it is probable, nay, certain, that if the Legislature had anticipated that but a third or a quarter of the whole sum could have been obtained, especially at an expense of $1185 on 11,000, that it would have deemed it a very unwise policy to authorize any loan.

It plainly was not the duty of the commissioners to provide for the payment of the interest on any loan, until they were satisfied by some evidence that such loan was made.

What should that evidence be? Should it be a notice of the fact by the Loan Agent, or the Governor, or more properly the transmission to the Receiver of the legal vouchers of the loan, to wit:— the certificates of the deposit of the money borrowed?

Until the money was deposited, no loan could be made; any arrangements, negotiations, contracts, or propositions, were but preliminary to a loan, and might or might not be carried into effect.

The certificates of the deposit of the fund in the bank selected by

the Governor and Commissioners, payable to the order of the Receiver, signed by the cashier, was the proper and only conclusive evidence of the loan.

This was the evidence which the agent was bound to furnish to the commissioners, and this was the evidence upon which the commissioners were bound to act.

It is true that the commissioners might possibly be satisfied by the statement of the agent, and might perhaps be justified in acting upon his statement as a public officer.

The letter announcing the loan of $31,000 at Cincinnati, was received in July.

This loan was made payable in installments, as follows:

$1,000 on the 23d of June, and $3,000 on the last day of July, and at the end of every month thereafter until paid.

The interest by law became due semi-annually, that is, six months after the deposit of the money. About the 9th of July the two certificates of deposit of $500 each, payable to the order of Byron Kilbourn, were received.

They were the first legal vouchers, and let me here add, the only legal vouchers of a loan of any character ever received or seen by any of the commissioners.

The legal objection to these certificates, the circumstances under which they were received with the hesitation and reluctance of the Receiver, have been already explained.

And I will further remark, that had not the Receiver had a strong confidence at the time in the ability and desire of the Loan Agent, to perfect the loan of $30,000, according to the law, those certificates would have been rejected.

Admitting that the loan of $1,000 was legally made, or that the same became valid by the sanction of the Receiver, and that the commissioners had entire confidence in the consummation of the loan, did duty, did prudence require the commissioners to call in the interest at that time?

The interest on the $1,000 then received became due on the 20th December-the interest on the balance of $30,000, if received could not by law become due before the close of each of the ten next suc