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Terrible Naval Fight in the Chesapeake!,

The Rebel Steamer Merrimac Sinks the Cumberland and takes and Burns the Congress!

The Cumberland's Crew Consisted of 500 Persons, — nearly one-half of whom were Lost!

A BAD AFFAIR, ALL ROUND.

THE MERRIMAC RETURNED TO NORFOLK.

Leesburg Occupied by Federal Troops.

Gen. Banks Returns Runaway Slaves

TELEGRAPH LINE TO FORT MONROE.

Foreign News.

Minute Description of the Merrimac and of the Battle in the Chesapeake.

The Gun Boat Oregon Struck by the Merrimac and Blown Up!

Three Federal Vessels of War Lost, and one Seriously Damaged!

About 200 Sailors Killed and Drowned.

Telegraphed to Rock Island Argus.

FORT MONROE, March 9. — The Merrimac was signaled this morning down the channel from Norfolk, in front of Sewell's Point battery. All was excitement about Fort Monroe at this news, and the Cumberland, Congress, Minnesota, St. Lawrence and Roanoke exchanged signals of danger.

The Merrimac has nothing above water but her flag-staff, flying the rebel flag, and smoke stack. She moved slowly and steamed directly for the Cumberland and Congress, lying at the mouth of James river.

The Cumberland opened on her with heavy guns, but the balls glanced off having no effect. At the same time the rebel iron clag boats Yorktown and Jamestown, came down James river and engaged our frigates on the other side.

Our batteries at Newport News opened on the gunboats to assist the Cumberland and Congress, which being sailing vessels, were at the mercy of the steamers. They both rained heavy iron broadsides on the Merrimac, which was slowly approaching, but all the effect visible was to slightly check her progress. She then ran against the Cumberland, striking her about midships, literally knocking open her side. She then drew off and fired into the disabled ship, and again dashed against her with her iron clad prow and knocking in her prow, left her to sink, and started for the Congress, lying about a quarter of a mile distant, which was engaging the Yorkstown and Jamestown. She having no regular crew on board, and being only partly manned by 3 companies of the naval brigade, seeing the hopelessness of continuing the fight, struck her colors.

The Jamestown then took from her all her officers as prisoners. Her crew escaped in boats.

The vessel was fired by the rebels.

After this the Merrimac and 2 gunboats opened with shot and shell on the Newport News batteries.

Some accounts say the garrison have been compelled to retreat to the woods. Others say the gunboats were obliged to retreat.

The Minnesota did not have steam up in time to aid the two frigates. She was followed by the St. Lawrence, and from necessity engaged the rebel vessel at a distance of a mile.

It was the impression at this point that both vessels were considerably damaged, but these statements are based on what could be seen with a glass at a distance of 8 miles.

The Merrimac was also believed to be aground when the boat left. She lay a mile distant from the Minnesota, making no attempt to molest her.

After the last gun was fired from the Minnesota, persons declare they saw dense volumes of vapor rise from the Merrimac, indicative of an explosion of some sort. It is not known if this is so, but it is believed she was aground.

It was the intention of the Minnesota to run to close quarter, and avoid the iron prow of the Merrimac and carry her by boarding. To this the Merrimac did not seem inclined to give opportunity.

As the Baltimore boat left Old Point, she met the Ericson steamer Monitor going in.

LATER — Fort Monroe, March 9. — The Monitor arrived at 10 o'clock last night, and immediately went to the protection of the Minnesota, which was aground below Newport News. At 7 o'clock to-day the Merrimac, Jamestown, Yorktown, and several tugs went towards the Minnesota and opened fire. The Monitor met them and opened fire, when the enemy's vessels retreated except the Merrimac. These two iron vessels fought from 8 o'clock till 12, part of the time touching each other, when the Merrimac retreated.

The Monitor was commanded by Lieutenant Worden, and was handled with great skill assisted by Chief Engineer Steiner.

The Minnesota was somewhat injured, but kept up a continuous fire.

The Monitor is uninjured, and ready for another attack.

A dispatch was also received by the secretary of the navy, from assistant secretary Fox, saying, in addition to the above, that the Merrimac retreated, but it is impossible to say whether injured or not.

Lieut. Worden, commander of the Monitor, was injured by cement from the pilot house being driven into his eye, but probably not seriously.