A group of Washington men that includes James Taggart, Orren Boyle, Wesley Mouch, Dr. Floyd Ferris, and Mr. Thompson (the Head of State) meet to discuss the ramifications of a proposed series of laws that would restrict economic change. Although worried about public backlash, the group decides to enact the laws, which are labeled Directive 10-289. The purpose of Directive 10-289 is to arrest the country's economic decline by freezing the economy in its current state. The directive makes it illegal for workers to leave their current jobs and prevents businessmen from closing their doors. It forbids the introduction of inventions or new products, and it requires companies to produce an amount of annual goods identical to the amount produced the previous year. All wages, prices, profits, and dividends are frozen, and every individual is obligated to spend as much as he did in the previous year. The directive also sets up a Unification Board to hear all disagreements arising from the new laws. The Unification Board's decisions on any issues that surface will be final.
Upon hearing that the directive has been enacted, Dagny immediately resigns, as do other people around the country who refuse to work either as a slave or a slave driver. Dagny retires to a hunting lodge in the mountains that she inherited from her father.
The directive also requires that all patents, including the one for Rearden Metal, be signed over to the government within two weeks. At the end of the two-week period, Rearden hasn't yet complied. Dr. Ferris comes to Rearden's office and tells him that if he doesn't sign, his affair with Dagny will be broadcast to the country, portraying Dagny as a slut. Rearden knows that if Dagny were present, she would not permit him to sign over the rights to his metal. But he also realizes the magnitude of his guilt. He knows that he should have immediately divorced Lillian and proclaimed to the world his love for Dagny. He can't allow Dagny to pay the price of his error, so he signs.
