After I posted in "H vs. H" that the earliest "villain rally" known to me was in STAR-SPANGLED COMICS #7 (1942), I had the nagging feeling that I had indeed seen mention of an earlier team-up of comics-criminals.
A dim memory led me to reread Mike Conroy's 500 COMICBOOK VILLAINS, and sure enough, there was an earlier story-- sort of. It was a "Mr. Scarlet" tale appearing in Fawcett Publications' AMERICA'S GREATEST COMICS #1, dated 1941. That would beat the Needle/Doctor Weerd tale from SSC (though not the Joker/Catwoman crossover in BATMAN)-- except that, according to what Internet evidence I could find, none of the villains appearing in AGC #1 had appeared before. These villains were apparently created for this one appearance, as a team called "the Death Batallion," and so I'd hesitate to consider their teamup as a true "villain rally."
Incidentally, the Wikipedia writeup for "Mr. Mind and the Monster Society of Evil" rates that group as "the first supervillain team in comics to contain villains that a hero had fought previously," which is obviously incorrect given the SSC example. So, even though Fawcett can probably lay claim to the first BIG "villain rally," I'm rather glad that Jerry Siegel, founder of the whole damned ball of superheroic wax, can lay claim to the "villain rally" idea (so far as I can tell at this time, anyway).
Also incidentally: though in BATMAN #2 the Catwoman isn't costumed and doesn't seem to function as anything more than one of Milt Caniff's "shady ladies," in her very next appearance in BATMAN #3, she does join the rank of the costumed, wearing a gaudy orange dress and a big cat's-head mask. Still, not until 1946, in a tale titled "Nine Lives Has the Catwoman," does she get refitted into her familiar (and un-catlike) purple-and-green garments, and starts committing "cat-crimes" with various catlike devices.