Houston stressed finical responsibility to cut the debt in the republic . Houston eliminated dozens of government positions and cut the size of the army. He tried to sell navy ships, but angry citizens of Galveston prevented the sale.
In March 1842 a Mexican army invaded Texas and occupied San Antonio, Goliad, and Refugio.
The Mexican army withdrew, but many Texans panicked. President Houston tried to save the government archives (arkives) documents by moving them from Austin to Houston.
The people of Austin thought Houston was planning to move the capital from Austin. When the government officials tried to move the official documents some Austin residents, led by Angelina Eberly, fired on them. This skirmish is known as the Archives War .
In November 1842, Houston ordered a militia of 750 to patrol the area from San Antonio to Laredo. The Texans discovered a Mexican army nearby and attacked them near the Rio Grande river in the town of Mier. After two days of fighting the Mexican army, the Texans, outnumbered and low on supplies, surrendered on December 26, 1842.
The captured Texas army escaped from the Mexican army on February 11, 1843. Mexican troops recaptured the Texan troops about a week later. Santa Anna now back in power in Mexico ordered every tenth Texans executed as punishment for their escape attempt, the prisoners were ordered to draw beans from a jar. Those who drew black beans were shot; those who drew white beans were marched to prison in Mexico City.