Oliver sleeps until the late morning, and wakes up slowly to find Fagin boiling coffee for his breakfast. Fagin checks to see if Oliver is awake—Oliver pretends still to be asleep, though he is semi-conscious. Fagin then latches the door of the apartment and pulls a small box out of a hutch in the floor—the box contains jewels and other valuable items, which Fagin examines with great relish, remarking to himself how fine these objects are. Fagin mumbles to himself about the men who stole some of these objects, and implied that they have been hung by the authorities, while Fagin has been left with the booty.
Another anti-Semitic stereotype: the idea that Jewish members of society were somehow "obsessed" with gold and jewelry. There are numerous historical reasons for this association—the fact that many European societies did not allow Christians to lend money at interest, thus causing many Jewish people to enter early banking industries—but Dickens does not concern himself with these subtleties. Rather, his Fagin is an amalgam of various common Jewish stereotypes of the time.
Oliver's eyes open for a moment and catch Fagin's—Fagin immediately closes the lid and hides the box, asking Oliver how much of the preceding he has seen. Oliver says he has seen only a little, but admits to noticing the jewels, which Fagin explains are the "little bit" he has to live on, now, in his old age. Oliver remarks to himself that Fagin must be a "miser," to live with such wealth in such squalid surroundings.
Fagin is also worried that Oliver will realize how much money he manages. What Fagin does not know, however, is that Oliver's concern for money is only very basic: Oliver wants enough money to live comfortably and stably, but he has no desire to be rich. This goodness, ironically, is later rewarded by the relatively large inheritance Oliver receives.
The Dodger returns to the apartment with a "sprightly" boy he introduces to Oliver as Charley Bates. Fagin asks what the Dodger and Bates have "made" that morning, and the Dodger replies he has "made" some pocket-books, and Bates that he has made some handkerchiefs, or "wipes." Fagin asks Oliver if one day he will "make" wipes, and Oliver readily agrees, not understanding that to "make" means to steal these objects. The boys laugh aloud at how "green," or naïve, Oliver is.
Oliver believes that Bates and the Dodger work in some kind of factory and manufacture these items. He will learn, slowly, that they simply steal them. Dickens here attributes Oliver's naiveté to a desire to believe the best in people—but it is sometimes difficult to believe, in the novel, that Oliver is so willing to ascribe goodness to characters who are so clearly immoral and "bad."
Fagin then plays a "game" with the Dodger and Bates, wherein he puts on a large coat, filled with trinkets and baubles, and challenges the two to steal from it without Fagin's noticing. They play this game for a while, and Oliver watches, not understanding how the game relates to their "jobs" in the streets. Two women, Bet and Nancy, arrive dressed in finery, and after a little drink they head out with the Dodger and Bates for the afternoon.
This "game" is a form of pickpocketing practice for the Dodger and Bates. Fagin, in this way, creates a life that almost resembles a kind of foster home, where he cares for his "children" and helps them to play. But, in reality, this is only the appearance of a family: Fagin's relationship to the boys is only motivated by Fagin's greed.
Fagin shows Oliver how easy the life of these young men and women is—they "work" only in the mornings, and are free to spend time to themselves in the afternoon, unless a "job" presents itself to them by chance. Fagin has Oliver practice picking his pocket, and also has him take stitches out of people's personalized handkerchiefs, but Oliver does not understand how these "games" relate to the jobs the Dodger and others do in the streets. Fagin says, simply, that Oliver ought to make those boys his model, and do as they do.
Fagin begins, here, to tell Oliver that he wishes for him to pattern his behavior on Bates' and the Dodger's. Fagin wishes to "raise" Oliver in the tradition of these other pickpockets. But Fagin will encounter resistance on Oliver's part—the boy is too virtuous to be corrupted by his surroundings, even when forced to by those who have power over him, like Fagin and, later, Sikes.