The accompanying report of the Secretary of the Navy gives a satisfactory exhibit of the operations and condition of that branch of the public service. A number of small vessels, suitable for entering the mouths of rivers, were judiciously purchased during the war, and gave great efficiency to the squadron in the Gulf of Mexico. On the return of peace, when no longer valuable for naval purposes, and liable to constant deterioration, they were sold and the money placed in the Treasury. The number of men in the naval service authorized by law during the war has been reduced by discharges below the maximum fixed for the peace establishment. Adequate squadrons are maintained in the several quarters of the globe where experience has shown their services may be most usefully employed, and the naval service was never in a condition of higher discipline or greater efficiency. I invite attention to the recommendation of the Secretary of the Navy on the subject of the Marine Corps. The reduction of the Corps at the end of the war required that four officers of each of the three lower grades should be dropped from the rolls. A board of officers made the selection, and those designated were necessarily dismissed, but without any alleged fault. I concur in opinion with the Secretary that the service would be improved by reducing the number of landsmen and increasing the marines. Such a measure would justify an increase of the number of officers to the extent of the reduction by dismissal, and still the Corps would have fewer officers than a corresponding number of men in the Army. The contracts for the transportation of the mail in steamships, convertible into war steamers, promise to realize all the benefits to our commerce and to the Navy which were anticipated. The first steamer thus secured to the Government was launched in January, 1847. There are now seven, and in another year there will probably be not less than seventeen afloat. While this great national advantage is secured, our social and commercial intercourse is increased and promoted with Germany, Great Britain, and other parts of Europe, with all the countries on the west coast of our continent, especially with Oregon and California, and between the northern and southern sections of the United States. Considerable revenue may be expected from postages, but the connected line from New York to Chagres, and thence across the Isthmus to Oregon, can not fail to exert a beneficial influence, not now to be estimated, on the interests of the manufactures, commerce, navigation, and currency of the United States. As an important part of the system, I recommend to your favorable consideration the establishment of the proposed line of steamers between New Orleans and Vera Cruz. It promises the most happy results in cementing friendship between the two Republics and extending reciprocal benefits to the trade and manufactures of both.