The holidays end and the real social season opens. Mrs. Peniston enjoys watching from above and commenting on the goings-on.
The fall didn't go well on Wall Street, so everyone "feels poor" except for Welly Bry and Simon Rosedale.
Because of this distinction, Rosedale has become particularly popular lately. Mrs. Fisher has latched on to him, which, by this point, shouldn't surprise you at all. But he still wants Lily by his side.
Grace Stepney – Mrs. Peniston's companion – has definitely noticed the attentions Rosedale pays to Lily. She's a big gossip, and she doesn't fail to inform Mrs. Peniston of her niece's activities.
Grace is one of those people concerned primarily with herself. She dislikes Lily only because she thinks Lily dislikes her. And Lily is too self-absorbed to realize the dangers of a person like Grace Stepney and to take measures to befriend her.
Meanwhile, Jack Stepney and Gwen return from their honeymoon, and Mrs. Peniston gives a dinner for them. She invites Grace because it's a family dinner.
Grace is elated; she is often ignored socially, so this is a big deal for her.
Then, Mrs. Peniston suddenly changes her mind, and says that it would be better to have Grace another night instead. Grace realizes that Lily stepped in and got her un-invited.
Now, Grace is out for revenge…. She goes to Mrs. Peniston and tells her that rumors are flying about Lily and Gus Trenor.
Mrs. Peniston is shocked and refuses to believe it. She turns on Grace and berates her for wasting her time with such baseless accusations. Besides, she says – she pays Lily's bills herself, so Lily has no need to get money from a married man like Gus.
Then Grace drops another bomb: Lily has some rather intense gambling debts to pay off.
This horrifies Mrs. Peniston, who is uncomfortable with the idea of her niece gambling.
Outwardly, Mrs. Peniston writes all this off. But, inwardly, she feels "contaminated" at being part of such vileness and harbors some resentment toward Lily for provoking this gossip in the first place, even if it isn't true.