1. Section 9 of the Federal Reserve Act, as amended June 21,
1917, is constitutional insofar as it provides that state banks
which have joined the Federal Reserve System, their officers, etc.,
shall
Page 274 U. S. 257
be subject to the penalties of Rev.Stats. § 5209, which punishes
misapplication, etc., of a bank's funds. P.
274 U. S.
258.
2. The acts thus made criminal may be punishable also under the
laws of the state. P.
274 U. S.
258.
3. It is not a condition to the power of Congress to punish such
acts that they result in any loss to the Federal Reserve Banks. P.
274 U. S.
258.
4. When necessary in order to prevent an evil, the law may
embrace more than the precise thing to be prevented. P.
274 U. S. 259.
5. Congress may employ state corporations, with their consent,
as federal instrumentalities and make fraud that impair their
efficiency crimes. P.
274 U. S. 259.
Response to a question certified by the circuit court of appeals
arising upon a review of convictions under indictments for aiding
and procuring misapplication of state bank funds and conspiracy to
misapply them.
MR. JUSTICE HOLMES delivered the opinion of the Court.
Westfall was convicted under two indictments, the first of which
charged him with aiding and procuring the branch manager of a state
bank which was a member of the Federal Reserve System to misapply
the funds of the bank. The second indictment charged a conspiracy
to misapply the funds of the bank between the same and other
parties. Both were based upon the issuing a fraudulent certificate
of deposit for ten thousand dollars and the paying the same from
the funds of the bank. The Circuit Court of Appeals for the Sixth
Circuit certifies this
Page 274 U. S. 258
question:
"Is the provision of § 9, chapter 6, of the Federal Reserve Act
of December 23, 1913 [38 Stat. 259, 260], as amended June 21, 1917
[c. 32, § 3; 40 Stat. 232], and July 1, 1922, constitutional
insofar as it provides that"
"such banks and the officers, agents and employees thereof shall
also be subject to the provisions of and the penalties prescribed
by "
Section 5209 of the Revised Statutes?
The amendment of July 1, 1922, referred to, is, we presume, c.
274, 42 Stat. 821. It has no immediate bearing upon the question
propounded, and, as it is not relied upon in argument, we shall
leave it on one side.
It is not disputed that Rev.Stat. § 5209, if applicable,
punishes the bank manager and those who aided and abetted him in
his crime.
Coffin v. United States, 156 U.
S. 432,
156 U. S. 447.
The argument is that Congress has no power to punish offenses
against the property rights of state banks. It is said that the
state is so broad that it covers such offenses when they could not
result in any loss to the Federal Reserve Banks, and it is
suggested that, if upheld, the Act will invalidate similar statutes
of the states. This argument is well answered by
Hiatt v.
United States, 4 F.2d 374, 377,
cert. denied, 268
U.S. 704. Of course, an act may be criminal under the laws of both
jurisdictions.
United States v. Lanza, 260 U.
S. 377,
260 U. S. 382.
And if a state bank chooses to come into the system created by the
United States, the United States may punish acts injurious to the
system, although done to a corporation that the state also is
entitled to protect. The general proposition is too plain to need
more than statement. That there is such a system and that the
Reserve Banks are interested in the solvency and financial
condition of the members also is too obvious to require a
repetition of the careful analysis presented by the Solicitor
General. The only suggestion that may deserve a word is that the
statute applies indifferently
Page 274 U. S. 259
whether there is a loss to the Reserve Banks or not. But every
fraud like the one before us weakens the member bank, and therefore
weakens the system. Moreover, when it is necessary in order to
prevent an evil to make the law embrace more than the precise thing
to be prevented, it may do so. It may punish the forgery and
utterance of spurious interstate bills of lading in order to
protect the genuine commerce.
United States v. Ferger,
250 U. S. 199.
See further Southern Ry. Co. v. United States,
222 U. S. 20,
222 U. S. 26.
That principle is settled. Finally, Congress may employ state
corporations with their consent as instrumentalities of the United
States,
Clallam County v. United States, 263 U.
S. 341, and may make frauds that impair their efficiency
crimes,
United States v. Walter, 263 U. S.
15. We answer the question:
Yes.