In "that portion of the Union lately in rebellion" the aspect of affairs is more promising than, in view of all the circumstances, could well have been expected. The people throughout the entire south evince a laudable desire to renew their allegiance to the government, and to repair the devastations of war by a prompt and cheerful return to peaceful pursuits. An abiding faith is entertained that their actions will conform to their professions, and that, in acknowledging the supremacy of the Constitution and the laws of the United States, their loyalty will be unreservedly given to the government, whose leniency they cannot fail to appreciate, and whose fostering care will soon restore them to a condition of prosperity. It is true, that in some of the States the demoralizing effects of war are to be seen in occasional disorders, but these are local in character, not frequent in occurrence, and are rapidly disappearing as the authority of civil law is extended and sustained. Perplexing questions were naturally to be expected from the great and sudden change in the relations between the two races, but systems are gradually developing themselves under which the freedman will receive the protection to which he is justly entitled, and, by means of his labor, make himself a useful and independent member of the community in which he has his home. From all the information in my possession, and from that which I have recently derived from the most reliable authority, I am induced to cherish the belief that sectional animosity is surely and rapidly merging itself into a spirit of nationality, and that representation, connected with a properly adjusted system of taxation, will result in a harmonious restoration of the relations of the States to the national Union. The report of Carl Schurz is herewith transmitted, as requested by the Senate. No reports from the honorable John Covode have been received by the President. The attention of the Senate is invited to the accompanying report of Lieutenant General Grant, who recently made a tour of inspection through several of the States whose inhabitants participated in the rebellion. ANDREW JOHNSON Washington, D.C., _December_ 18, 1865. REPORT OF CARL SCHURZ ON THE STATES OF SOUTH CAROLINA, GEORGIA, ALABAMA, MISSISSIPPI, AND LOUISIANA.