Faust walks back and forth, preoccupied, while Mephistopheles swears vehemently. Faust asks what’s ailing the devil, who explains that Margarete’s pious mother gave the girl’s new jewels to a local priest as a donation to the Church, fearful that they were treasures of wickedness. The priest, of course, accepted.
Margarete’s mother is very controlling of her daughter, which no doubt contributes to the girl’s naïveté. Though the Church preaches against earthly wealth, it can hypocritically be a greedy institution, as the priest’s seizure of the jewels suggests.
Faust inquires about Margarete, here referred to as Gretchen. Mephistopheles says she is grieving about the loss of her jewels and thinking about who may have brought them to her. Faust orders that another set of jewels be brought to the girl at once, and also orders the devil to groom Margarete’s neighbor, presumably so that she can be of use to him. The devil obliges. Lovesick fools would do anything to entertain their ladies, he says.
Faust referring to Margarete as “Gretchen” is like using a pet name, and it indicates his affection for the girl. Faust intends to use Margarete’s neighbor’s house as a private place where he and his beloved can meet. While love is a positive feeling, it can also lead us into temptation, which the devil delights in.