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On July 27, 1861, Major General George McClellan was appointed commander of the Federal Division of the Potomac.
The Division of the Potomac consisted of Irvin McDowell's Department of Northeastern Virginia and Joseph Mansfield's Department of Washington. Nathaniel Banks's Department of the Shenandoah was also added to McClellan's purview. The armies of these departments were combined to form the Army of the Potomac.
McClellan, 34, was one of the first Northern heroes of the war after his recent successes in western Virginia. On the day he took command in Washington, he wrote home to his wife Ellen* about his experiences...
...I find myself in a new & strange position here -- Presdt, Cabinet, Genl Scott & all deferring to me -- by some strange operation of magic I seem to have become the power of the land. I almost think that were I to win some small success now I could become Dictator or anything else that might please me -- but nothing of that kind would please me -- therefore I won't be Dictator. Admirable self denial! I see already the main causes of our recent failure -- I am sure that I can remedy these & am confident that I can lead these armies of men to victory once more...
Just after the rout and panic at Bull Run, the War Department began the work of gathering up the scattered army by setting up rallying points around the city of Washington and announcing that they would be the only places where rations would be distributed. The three-month volunteers that did not reenlist were sent home and Northern governors hurried new three-year volunteers to the city.
McClellan quickly went to work shaping his new army -- rounding up stragglers, weeding out incompetent officers and training the new recruits to be soldiers.
*The letters from McClellan to his wife are widely quoted in books on the Civil War, but there is some controversy about their authenticity and accuracy. The originals are gone, but portions were copied into a notebook by McClellan. His daughter, working with the original letters, added to the transcripts later. For more on the letters, check out two posts at Civil War Bookshelf -- Dimitri Rotov's problems with the letters and Stephen Sears's response.