Lily has begun to use Mrs. Hatch's prescription for chloral (chlorinated ethyl alcohol) in order to sleep. The pharmacist warns her not to increase the dosage. While filling the prescription, she encounters Rosedale. Rosedale and Lily go for tea, and Lily tells Rosedale her reasons for leaving the employ of Mrs. Hatch: She did not want to be perceived as assisting Mrs. Hatch's romantic designs on the wealthy Van Osburgh. Because Rosedale admits he has heard rumors of Lily's involvement, Lily expresses that she might as well have stayed employed with Mrs. Hatch.
Lily tells Rosedale that she is working for Mme. Regina, a revelation that shocks the wealthy financier. She also tells him that she owes her entire legacy to Trenor and others. Before he can offer to help her, Lily excuses herself from the table. Rosedale walks her back to her boarding room and asks to see her again. Lily graciously agrees.
Alone in her room, Lily contemplates using her inheritance from Mrs. Peniston to set up her own millinery establishment. From the proceeds, she reasons, she can pay back Trenor. Such a plan, however, she knows will take years. She blames Bertha for her misfortune, and wonders how long she can continue to resist the temptation to use the letters against her. She drugs herself and falls into a deep sleep.
