Mr. Seward to Lord Lyons.

My Lord: On the 8th of January instant I informedy your lordship that the attention of this government was seriously directed to the subject of the impris- . onment of the master and crew of the steamer Banshee, a vessel which had been captured in an attempt to run the blockade, and which had been represented by you to be a British vessel.

It is known to this government, from evidence which has been communicated to her Majesty’s government, that the pretended insurgent authorities at Richmond are directly engaged in importing ordnance and supplies and in exporting cotton and tobacco through the blockade, in vessels sometimes owned and sometimes chartered by themselves, under the disguise of neutral merchantmen; and that instructions are given by them to their agents engaged in such trade to conceal the belligerent character of their navigators, and to simulate in all cases the neutral character of British vessels. It has been further made known to her Majesty’s government that enterprises of the nature I have indicated are begun in, and prosecuted from, and return at last into, many of the British colonial ports, as well as into the ports within the British realm.

It has also been made known to her Majesty’s government that released blockade runners have availed themselves of their freedom to contrive and execute the crimes of murder and piracy within the harbors and on board of vessels of the United States; and that, for this reason, it has been deemed necessary to institute a rigorous investigation into the character of all persons who are found on board of captured vessels in the act of violating the blockade, before they can be set at liberty.

Such an investigation has been made in the case of the officers and crew of the Banshee.

That vessel was captured on the 21st day of November last, by a war transport of the United States, in attempting to enter Wilmington. Her papers were all understood to have been thrown overboard, and the captain stated that he had so thrown them overboard. She had a so-called confederate flag; and it is stated that this flag was flying when the vessel was captured. She was built at the yard of Jones, Quiggin & Co., in Liverpool, and, while her construction was going on, she was repeatedly reported to this government by our consul at that place as being built like the Alexandra and Alabama and Florida, for piratical purposes, and this suspicion had been communicated to the naval officers in our blockading squadron. She was upon these grounds reported to the navy as an insurgent vessel, and the imprisonment of her officers and crew was ordered under a belief or suspicion that this was her true character. The suspicion was strengthened by the fact that, on her trial in the prize court, no person came to claim either the vessel or the cargo.

The inquiry which has been made results in the following facts: that she was not a privateer or insurgent vessel, but was owned in England and employed in running the blockade on account of British subjects.

It is not yet known by whom she was chartered or freighted on the voyage in which she was captured. It does not appear whether the pretended insurgent authorities in Richmond were concerned in the voyage or not. Jonathan Steele, the captain, is an Englishman. He has run the blockade eight times, and has been captured and released twice.

Richard Armstrong, an Irishman, was chief steward, and has once before run the blockade.

Thomas Burns, a British subject, born in Nassau, has once run the blockade.

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John Byford, an Englishman, has twice run the blockade.

John Byrnes, an Irishman, has run the blockade once.

Charles Bethel is a negro lad and British subject.

W. Campbell, an Irishman, has run the blockade six times

Christopher Connor, a ship’s boy, was born in Liverpool.

John Duff, an Englishman, has run the blockade twice.

Jerry Driscoll, an Irishman, has twice run the blockade.

Roger Donnelly, a Scotchman, has run the blockade seven times,

James Erskine, chief engineer, has twice run the blockade.

Nathan Erskine, a Scotchman, has run the blockade once.

F. Foley is an American traitor and insurgent.

Adam French, an Englishman, has run the blockade twice.

Cecil Gardner, an Irishman, has run the blockade twice. .

David Houston, a Scotchman, has run the blockade twice.

Owen Hughes, a Welshman, has run the blockade once.

Samuel Johnson, an Irishman, has run the blockade twice.

Robert McKeon, a Scotchman, has run the blockade three times.

James Kenny, an Irishman, has run the blockade four times.

James Kamichan and William Lindsay are Scotchmen, each of whom has run the blockade once.

J. McCallum, a Scotchman, has run the blockade twice.

Samuel McCann, an Irishman, has run the blockade once.

William Miller, British subject, a native of New Brunswick, has run the blockade six times.

James McCaffrey, a native of Liverpool, has run the blockade twice.

Walter McDonald, a Scotchman, has run the blockade four times.

Con. McClusky, an Irishman, has run the blockade twice.

William Marshal is a British subject.

John A. Power, an Irishman, has run the blockade twice.

H. E. Rover is a German, and not a British subject.

Allan Smith is an Irishman. He has run the blockade twice.

Richard Sherrin, an Irishman, has run the blockade twice.

Thomas Sherridan, an Irishman, has run the blockade three times.

John Thompson, born in France, but claims to be a British subject; he has run the blockade once.

John Watson was born in Ireland; has run the blockade four times.

Valentine Walsh is an Englishman, who has run the blockade twice.

Thomas White, an Irishman, has run the blockade twice.

Malcolm Wilke, an Englishman, has run the blockade once.

In view of the facts thus ascertained, all of these persons, except F. Foley, who is an insurgent, Will, under the circumstances, be released from their confinement. But I think it proper to inform your lordship that all of them will be held under vigilant surveillance as dangerous persons, whose residence in this country cannot be permitted; and they will all be expected to leave the United States within fifteen days after their discharge from custody. I think it proper, also, to say that, in all cases where blockade runners are hereafter captured, during the present insurrection, the character of the parties will be subjected to a severe scrutiny, and they will receive such a disposition as the public safety shall at the time seem to require.

I have the honor to be, with high consideration, your lordship’s obedient servant,

WILLIAM H. SEWARD.

Right Hon. Lord Lyons, &c., &c., &c.