Good thing Walt knows how Hank would behave when confronted with the tears of an in-law, because with Hank out of the office (and the blinds so helpfully closed, another masterstroke of Walt's clairvoyance), Walt quickly gets to the work of attaching a device to Hank's computer and a bug to the back of one of Hank's framed photographs. Now he'll know what the cops know.
Just in time, Walt finishes closing up the photo frame, making it look to Hank as if he's just staring forlornly at a photo of a happy family, like unhappy family members do in the movies. Hank tells him not to worry. "It's always darkest just before the dawn."
What a coincidence, because it's pretty dark for Lydia Rodarte-Quayle right about now, as she's been abducted by the Three Amigos and placed at a table in a dark room. As Mike cuffs her to the chair, she stammers about her little girl, a decent enough trump card before, but Mike is in no mood. He tells her that Walt and Jesse are willing to give her more of a chance than he is, so he hands her a script to study and has her phone up one Hank Schrader.
Forced to follow the script exactly, with no funny business, upon penalty of Mike shooting her in the head, Lydia informs Hank of the tracer she's found on the bottom of one of her barrels. She keeps it cool (or Lydia-cool, which is not all that cool) as she tells Hank that she wouldn't want to interfere with an official investigation, she's just wondering what she should do about this thing. A quizzical Hank tells her to just set the barrel aside and wait to hear back from him. After hanging up, Hanks calls Gomie in and asks about the tracker -- whether he knows anything about trackers being put on methylamine barrels at Madrigal's Houston warehouse. Gomie says his team didn't do it. This is all transmitted to Walt, Mike, Jesse, and Lydia in their underground bunker via Walt's fancy new wiretaps. It's all Mike needs to hear to prove Lydia placed the tracker herself, and Lydia starts to panic, knowing what this means for her.
The Amigos convene, and Mike lays it out for them: now that Hank's been tipped off, he's going to think someone's trying to heist the barrels, so the Madrigal warehouse will be under tight surveillance. This annoys Walt because now it REALLY puts the methylamine out of play. Mike says they can get to the Madrigal warehouse first and take away as much methylamine as they can carry before Hank gets there. Talk then turns to Lydia's fate, and she starts hopping around in her chair, claiming innocence. Jesse believes her, because he is still pure of heart and decent of character, but Walt immediately sides with Mike: she's gotta die.