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security distribution and, in the case of stocks, is often accompanied by additional sales on the exchange made by the sponsoring banking house or syndicate.

The strength of the national interest in the proper functioning of the securities exchanges hardly can be questioned. Ours is a credit economy, dependent upon the exchanges for the liquidity of its fixed assets and for the solvency of its financial institutions. This national interest is a factor which of necessity colors any judicial consideration of the implications of the commerce clause. As Holmes, J., writing for the court in Missouri v. Holland (252 U.S. 416, 433, 435), sustaining an act of Congress to carry out a treaty relating to the protection of migratory birds, said:

it is not lightly to be assumed that, in matters requiring national action, 'a power which must belong to and somewhere reside in every civilized government' is not to be found

Here a national interest of very nearly the first magnitude is involved

We see nothing in the Constitution that compels the Government to sit by while a food supply is cut off and the protectors of our forests and of our crops are destroyed. It is not sufficient to rely upon the States. The reliance is vain, and were it otherwise, the question is whether the United States is forbidden to act."

While the existence of a national problem does not prove the existence of a national power, it does at least provide a good place to begin the inquiry. In the same case from which we have just quoted and in answer to the contention that the Migratory Bird Act constituted an invasion of power reserved to the States by the tenth amendment, Mr. Justice Holmes said (at 434):

“We must consider what this country has become in deciding what that amendment has reserved."

II The scope of the commerce clause is largely a question of fact.—That the scope of the commerce clause is commensurate with the national interests and that in proper circumstances Congress may control situations normally considered intrastate, is a doctrine announced by John Marshall more than a century ago. In discussing the power of Congress in Gibbons v. Ogden (9 Wheaton 1) he attempted to indicate something of its range by suggesting what it could not reach:

“The genius and character of the whole Government seem to be, that its action is to be applied to all the external concerns of the Nation, and to those internal concerns which affect the States generally; but not to those which are completely within a particular State, which do not affect other States, and with which it is not necessary to interfere, for the purpose of executing some of the general powers of the Government (at 195).”.

Thus was the matter put in 1824. And it should not be forgotten that this case, with its wide suggestion concerning the extent to which the delegated power over commerce may reach intrastate, came shortly after M'Culloch v. Maryland (4 Wheaton 316), with its doctrine of implied powers written into the theory of delegated powers, and constitutes part of Marshall's general development of constitutional interpretation. Under the affirmative implications of the words just quoted, it is permissible for Congress to regulate the internal concerns of a State if they affect other States and if it is necessary to interfere with them for the purpose of executing some of the general powers of the Nation.

As a corollary of the general rule that Congress has the implied power to take such steps as may be necessary to make effective its exercise of an express power, the Supreme Court has established the authority of Congress to enact whatever legislation is appropriate to "foster, protect, control, and restrain” interstate commerce. Second Employers' Liability Cases (223 U.S. 1); Mobile County v. Kimball (102 U.S. 691, 697); The Daniel Ball (10 Wall. 557, 564). This power, when need arises, extends not only to strictly interstate matters, but also to intrastate matters whenever the two are so intertwined or related as to affect interstate commerce or its successful regulation by the Federal Government. This exertion of congressional power is not restricted in niggardly fashion, but is recognized to be a governmental necessity and a beneficent adjunct of Federal authority

But before examining the method by which the power may be extended to embrace intrastate affairs, it is well to note that, for the regulation of security exchanges, there is a core of interstate transactions around which the power of Congress may be built. For considerable proportions of the sales on the larger exchanges are made by interstate communication or contemplate physical delivery across State lines. That the transportation occurs before or after the sale does not serve to remove the transaction from he powter of Congress to regulate under the commerce clause. Dahnke-Walker Milling Co. v. Bondurant (257 U.S. 282); McDermott v. Wisconsin (228 U.S. 115). That the thing sold is not tangible property but rather the evidence of indebtedness or of ownership does not serve to remove the transaction from the scope of the commerce clause. I'nited States v. Ferger (250 U.S. 199); Champion v. Ames (188 U.S. 321).

Interstate Commerce Commission v. Goodrich T. Co. (224 U.S. 194) is illustrative. In that case the Commission, acting under a congressional mandate, ordered the Goodrich Transit Co. and a number of other Great Lakes water carriers to file with the Commission on prescribed forms a statement of their operating revennes and expenses, their corporate organization and financial condition, and other desired data. The required statements were to contain information not only concerning joint rail and water business, which was the portion of the carriers business subject to Federal regulation under the then applicable statute, but also concerning other aspects of the carriers' operations, both intrastate and interstate. The Supreme Court held that the Commission's orders were valid. Separation of the total business of the carriers into its component parts seemed impracticable, and the accounting instructions were needed in order that the Commission could inform itself so as to enable it properly to regulate the matters within its authority. The decision is especially noticeable in view of the fact that, in the case of one of the objecting carriers, the revenue drived from joint rail and water traffic was less than 1 percent of its entire revenue.

Review of the decided cases indicates that the scope of congressional power is ascertainable only by reference to the facts surrounding each application of it. The problem and its treatment are strikingly similar to the procedure in cases involving the due process clause. For example, in Stafford v. Wallace (258 US 495) the Supreme Court sustained the Packers and Stockyards Act against attack under the commerce clause, noting that the business regulated was interstate commerce or so associated with it as to be within the Federal powers. The late Chief Justice Taft there said (at 513):

“It was for Congress to decide from its general information and from such special evidence as was brought before it, the nature of the evils actually present or threatening, and to take such steps by legislation within its powers as it deemed proper to remedy them.”

Some years later, in Tagg Bros. & Moorehead v. United States (280 U.S. 420, the Court had before it a case arising under the same statute; in this instance complaint was made that the act, in permitting the fixing of permissible charges of market agencies, violated the due process clause. The Court again upheld the act, saying (at 439) that fixing the commission merchants' fees was reasonable because “the purpose of the regulation attacked is to prevent their (the mer. chants') service from thus becoming an undue burden upon, and obstruction of that (interstate) commerce. In each case, the ultimate question was whether there was a reasonable connection between the means adopted by Congress and a permissible end. In each case the question was answered affirmatively.

The Supreme Court has often indicated its adherence to the doctrine that a declaration of a legislative body, charged with the duty of knowing public conditions, is of great weight in determining whether a particular statute is a ressonable and necessary exercise of power. This rule, while originally applied in due process cases (see, for example, Block v. Hirsh, 256 U.S. 135) has also been utilized by the Court in commerce clause cases.

Of the latter class, Chicago Board of Trade v. Olsen (262 U.S. 1), sustaining the Grain Futures Act, is of especial significance. And its significance becomes clear when the case is compared with Hill v. Wallace (259 U.S. 44), holding the Future Trading Act (a tax measure) unconstitutional. After the decision in the Hill case Congress, as a result of an investigation, concluded that regulation of boards of trade was necessary because trading in grain futures involved, or tended to involve, a burden upon interstate commerce; and passed the Grain Futures Act. Measured in terms of their objectives, there was no essential difference between the two statutes. But the tax statute was invalidated, the commerce one sustained. The difference in result turned on the finding by Congress as to the effect of futures trading upon interstate commerce.

It is apparent, then, that regulation of intrastate transactions may be embraced within the congressional authority over interstate and foreign commerce, if the fact is that such regulation is related to regulation of interstate commerce and implements or perfects the latter. A declaration by Congress, such as the declaration in an introductory section of the proposed act to regulate security exchanges, is affirmative evidence of the existence of the required relationship; the Suprenie Court will not lightly disregard it.

III

On foundations of fact, a wide expansion of the commerce power has been established.—The application and results of the doctrine described in part II of this memorandum are illustrated by a long line of cases in the Supreme Court of the United States. They show a steady and significant expansion of the acknowledged power of Congress to foster, protect, control, and restrain” where interstate or foreign commerce is concerned. They make manifest, in particular, the reach of congressional power to remove or to prevent interferences with or burdens upon interstate commerce. Such interferences or burdens may arise from the violent actions of individuals (in re debs, 158 U.S. 534), or the peaceable activities of state corporations (Northern Securities Co. v. United States, 193 U.S. 197) or the duties imposed on public officers by State laws (Shreveport Rate cases, 234 U.S. 342). Whatever may be the source and whatever the kind of interference or obstruction, the subject matter is one for the consideration of Congress.

The cases have arisen under various statutes: The Interstate Commerce Act, antitrust laws, Federal Trade Commission Act, and others. They have covered a wide range. Aside from differences on the facts, however, all of them stand together on a common ground, namely, that they are concerned with the development and expansion of the auxiliary power of Congress to reach as far into the States as may be necessary affectively to foster and protect interstate commerce. They make an elaborate array of authority for the exercise of the power of Congress over affairs normally considered intrastate. In addition to those already eited, and sometimes by way of repetition in order to emphasize the development, the more significant cases follow.

Earliest in point of time, as the first important national development, are the railroad cases. In re Debs (158 U.S. 564) (removal of obstructions to interstate commerce caused by strikers); Southern Ry. v. United States (222 U.S. 20) (Federal Safety Appliance Act applied to intrastate equipment of interstate railroad); Shreveport Rate cases (234 U.S. 342), and the Wisconsin Rate case (257 U.S. 563) (discontinuance of intrastate rates discriminating against interstate commerce); Colorado v. United States (271 U.S. 153), and Transit Commission of New York v. United States (284 U.S. 360) (discontinuance of intrastate branches under orders from Interstate Commerce Commission); and Texas & N. 0. R. Co. v. Brotherhood (281 U.S. 548) (compelling employers to grant free choice of arbitrators to employees).

Paralleling this expansion of Federal power over transportation facilities, has been the growth of supervision over commercial corporations. Powerful combinations threatening the welfare of commerce led successively to the Sherman Antitrust Act, the Clayton Act, and the Federal Trade Commission Act. Within the scope of these statutes, practices have been deemed restraints which concerned the organization and security structure of the corporation, not of themselves interstate commerce. Northern Securities Co. v. United States (193 U.S. 197) (consolidation of competing railroads by stock transfer to a holding company); Federal Trade Commission v. Western Meat Co. (272 U.S. 554) (acquiring stock in a competitor); Standard Oil Co. v. United States (221 U.S. 1) (formation of holding company out of stock of various petroleum corporations); United States v. Union Pac. R. Co. (226 U.S. 61) (purchase by one railroad of dominating stock interest in another); United States v. American Tobacco Co. (221 U.S. 106) (monopolizing tobacco industry by stock acquisition); United States v. Reading Co. (253 U.S. 26) (holding company controlling coal companies and their railroad facilities).

As coming closer to the present problem the following may be noted: Swift & Co. v. L'nited States (196 U.S. 375) (combination of livestock commission mierchants violates the Sherman Act); United States v. Patten (226 U.S. 525) (corner of the New York cotton market a restraint of trade); Stafford v. Wallace, supra (sustaining the Packers and Stockyards Act); Chicago Board of Trade v. Olsen, supra (upholding the Grain Futures Act); Binderup v. Pathe Exchange (263 U.S. 291) (“exchange" receiving interstate shipments of films and redistributing them to local exhibitors in the same State held to be a restraint on interstate commerce).

In the light of these cases alone, it is no longer open to question that Congress miay reach and control intrastate affairs whenever such control is necessary to the effective exercise of its power over interstate commerce. Ample power exists; and, as the Supreme Court has said in Florida v. United States (282 U.S. 194), 'it becomes only a question as to the “propriety of the exertion” of the power.

IV

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The exertion of Federal power is not restricted to the interstate transportation of commodities nor is it limited to persons engaged in interstate Commerce. It is not indispensable for the exertion of Federal power that it be directed to a specific interstate commerce transaction. No commodity need move from State to State. To be sure, where an actual interstate transaction is involved the exercise of power by Congress is more easily supported. But Congress is not so limited. Thus, in United States v. Ferger (250 U.S. 199), the question was whether the United States could impose punishment where a bill of lading had been fraudulently issued, no goods having been offered or delivered for shipment. The existence of power was vigorously objected to on the ground that there was no interstate commerce whatever but only a fraudulent scheme. Yet, the power was sustained. In regard to the objection the Court said:

“This mistakenly assumes that the power of Congress is to be necessarily tested by the intrinsic existence of commerce in the particular subject to commerce, and its effects upon it. We say mistakenly assumes, because we think it clear that if the proposition were sustained it would destroy the power of Congress to regulate, as obviously that power, if it is to exist, must include authority to deal with obstructions

and with a host other acts which because of their relationship to and influence upon commerce, come within the power of Congres to regulate, although they are not interstate commerce in and of themselves (at 203).”

Probably no one would contend that the hatters (Loewe v. Lawlor, 208 U.S. 274) or the coal miners (Coronada Coal Co. v. United Mine Workers of America, 268 U.S. 295) or the lessors of shoe machinery (United Shoe Machine Co. v. United States, 258 U.S. 451) were engaged in interstate commerce. Still, because what they were doing had a certain relationship to and undesirable effect upon interstate commerce in a general sense they were held subject to congressional power.

Further illustrations may be found in cases having to do with transactions sometimes described as interstate contracts. Here the cases are chiefly those holding certain transactions immune from State regulation because of their interstate character, and invalidating State statutes as applied to them. To the extent that these decisions turn upon objections under the commerce clause, they identify transactions to which congressional power may extend. Perhaps the most significant case in this group is Dahnke-Walker Milling Co. v. Bondurant (257 U.S. 282). In that case there was a contract, between a corporation of Tennessee and a person in Kentucky, under which certain quantities of grain were to be purchased by the corporation and delivered by the seller in Kentucky for transportation to Tennessee. Default having occurred through nondelivery and the corporation having brought an action in the courts of Kentucky, a defense was interposed on the ground that the plaintiff had not complied with the State corporation laws.

The defense was disallowed, the Court holding this to be an interstate transaction which the corporation was entitled to enter into without complying with the State law. To a like effect are Lemke v. Farmers' Grain Co. (258 U.S. 50, State grain grading and inspection act invalid); Robbins v. Shelby County Taring District

, (120 U.S. 489, State tax on interstate soliciting agent invalid); International Tesi Book Co. v. Pigg (217 U.S. 91, correspondence school corporation not compelled to comply with conditions imposed by State). That the solicitation of orders for interstate shipment is part of the interstate transaction, see Weeks v. Unital States (245 U.S. 618, regulation sustained under the Food and Drugs Act); and see Hall v. Geiger Jones (242 U.S. 509) for the suggestion that a security, although a chose in action, is subject to Federal control as an object of interstate commerce, Nor should Champion v. Ames, popularly known as the “Lotlery Case", previously cited, be forgotten in considering the power of Congress over the interstate transportation of such documents as lottery tickets.

V

Cases sustaining State regulation of insurance and other subjects as not inrolving interstate commerce do not stand in the way of Federal power. -An array of cases in which various State statutes were sustained must be considered, for the reason that the cases are so much relied on in support of the contention that the transactions with which they had to do are beyond the power of Congress. Chic among them all is Paul v. Virginia (75 U.S. 168). An insurance contract was held to be not interstate commerce and a condition imposed by the State upon tho entry of the foreign insurance company was sustained.

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Following that case it has been repeatedly declared that insurance is not interstate commerce. New York Life Insurance Co. v. Deer Lodge County (231 U.S. 495). Of a somewhat like character and antedating Paul v. Virginia is Nathan v. Louisiana (8 Howard 73), sustaining a State tax on the brokerage business. With these cases also may be grouped Hatch v. Reardon (204 U.S. 152, State stamp tax on stock sales), Ware & Leland v. Mobile County (209 U.S. 405, State license tax on brokers in futures), and United States F. & G. Co. v. Kentucky (231 U.S. 394), State privilege tax on commercial agencies). Moore v. New York Cotton Exchange (270 U.S. 593) may be noticed here, though it did not turn on a State statute. A contention that the cotton exchange was engaged in interstate commerce was denied and certain relief sought on the ground that the exchange's monopoly of its price quotations was a restraint of interstate commerce was refused. Mr. Justice Sutherland's statement (at 604) that “there is no averment of fact in the bill on which a violation of the anti trust law can be predicated" probably means no more than that.

But these cases do not stand in the way of congressional power. They may all be put to one side. In the first place, deicisions sustaining State statutes over objections on the commerce clause are hardly in point, certainly not authoritative, on the question of the power possessed by Congress. Assertion of the contrary would in effect mean that there is a definite division of power between the Nation and the States in regard to interstate commerce. But we know, the cases make it perfectly plain, that sometimes Congress can regulate intrastate commerce and sometimes the States can regulate interstate commerce. It does not follow that because a thing is subject to State taxation, it is also immune from Federal regulation under the commerce clause”, said Sutherland, J., in Binderup v. Pathe Erchange (263 U.S. 291, 311), Federal antitrust litigation), as he called attention to the fact that “cases cited

upholding State taxation as not constituting an interference with interstate commerce are of little value to the inquiry here." And see the recent case of Minnesota v. Blasius (54 Sup. Ct. 34, State taxation of livestock in the "current of commerce").

In the second place, aside from the emphasis repeatedly put on the personal nature of insurance contracts as taking them out of an interstate commerce classification, Paul v. Virginia and other cases of like character belong to a period prior to the fullest development by the Supreme Court of the present constitutional doctrine concerning the effect of the commerce clause on State power. It will be recalled that up to Cooley v. Board of Wardens (12 How. 299), there had been differences of opinion in the Court on the question whether the commerce clause per se deprived the States of power to regulate interstate commerce. In sustaining the State action (regulation of pilotage) called in question in that case the Court announced its much-discussed doctrine of interstate commerce of two kinds, namely, local and national. As to the former, State action was permissible in the absence of inconsistent Federal action (though as a matter of fact the case actually involved the exercise of power by the State supported by an express congressional permission). As the latter, State action was inadmissible, it being indicated that in this field the States were deprived of power. Interstate transportation of an article was thought to be commerce of a national character. Consequently, when the Court faced the question, as it did in Paul v. Virginia, where interstate transportation of insurance policies was involved, it would have been difficult to uphold State action if the subject matter, insurance, was conceded to be interstate commerce at all. A further reason for upholding State power came from Chief Justice Taney's doctrine, in Bank of Augusta v. Earle (13 Peters 519), asserting an unlimited power of the States over foreign corporations. Paul v. l'irginia thus belongs to a period not only of uncertainty about the effect of the commerce clause but also of distrust of foreign corporations. Such corporations, it was assumed, must be held in subjection to State power. Difficulty in so doing would be encountered if their activities were classified as interstate commerce. But the Supreme Court long since has pushed the development of the commerce clause to such a point that difficulties of that kind have substantially disappeared. Not only may a State regulate interstate commerce of local character; it may even regulate that which is national in character, if Congress permits it so to do.

VI

The respective fields of action of the Nation, and the States are not fired by the commerce clause but depend upon the will of Congre88.—As a result of the constitutional doctrine developed around the commerce clause and in the light of a few additional cases presently to be mentioned, it may be said that the true significance of the commerce clause is found in treating it, not as fixing a division of

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