Count Golm and Privy Councilor Schieler are at the Hotel Royal discussing the new projects for a north or an east harbor of the Sundin-Wissow railroad. The Count wants the east harbor; Schieler says he is no longer an official and has no influence. The Count speaks of his debts--fifty thousand thaler, due in October, and his account not particularly good with Lübbener. Schieler tells him he should marry a rich woman; suggests Else von Werben, mentioning the fact that Wallbach, a director of the railroad, is also trustee of the Warnow estates, and that Ottomar is engaged to Wallbach's clever sister, Carla. Wallbach calculates that half of the estate, if sold to the railroad, would be worth three or four times as much as the whole of it is now, but he hesitates to give advice in the matter. The Count proposes to buy the property at a lower rate and to sell it to the railroad. But they are reckoning without their host, Valerie, Baroness Warnow, who has, with her fifty years, acquired the right of a voice in administering the affairs of the estates; but Giraldi, her chamberlain, companion, and what not, is the power behind her. Schieler then tells Golm the history of Valerie, gives him an account of the will of her husband, and convinces the Count that the interests of the railroad and of Golm are identical. Schieler and Golm then go to call on Philip Schmidt, the general promoter of the railroad. Schieler has prepared Philip for the visit, and told him that Golm must be won over. Philip shows Schieler and Golm his pictures. The Count is pleased and flattered, and offers Philip the hospitality of Golmberg. Golm learns how Philip, a plain master mason, has come up by his intelligence, inventive genius, energy, and speculation, especially as promoter of the railroad scheme. Lübbener, previously notified by Schieler, drops in at Philip's to see Golm. Refreshments are served, and Philip, as a bluff, pretends to banish business. Victorine, a mezzo-soprano, and Bertalde, a dancing girl, and, later, Ottomar come in, and make a breezy scene. The company, as a jest, constitutes itself a committee of promoters.