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Every Chicano history text discusses how, after the end of the Mexican war, despite promises of protection of civil liberties and property contained in the Treaty of Guadalupe Hidalgo, the Mexican land holders in the United States were systematically stripped of their property and denied their civil rights.

In San Diego, the Californio land holders had a shorter distance to fall. They were poor before the Americans arrived, largely because of Indian raids, accidents of geography and political history. After the Americans arrived, the San Diego Californios were subject to the same prejudicial laws, racist intimations, greedy squatters, high taxes, expensive lawyers, and usurious bankers as was true elsewhere in California. The land law of 1851, which required all Mexican land owners to validate their grants before a Land Claim Commission, placed a tremendous hardship on Mexican landholders, who had to hire lawyers to represent them against all commers, sometimes hundreds of squatter claimants. All this cost money which could only be gotten by either mortgaging their rancho or selling their cattle. The first option led predictably to forced sale while the second was of limited economic help.

In San Diego, due to Indian raids, very few rancheros owned cattle by 1850. According to Charles Hughes, an expert on this subject, only fifteen out of forty five San Diego land owners had sizable herds of cattle on their property. Of those who had cattle, eleven Californios owned almost 80 percent of the animal stock. Hence the Mexican land owners in San Diego did not have enough cattle to take advantage of the high prices for beef in the gold fields.

The limited value of cattle as a resource to pay new taxes, higher costs of living, and legal expenses evaporated during a two year drought, between 1860-1862. It decimated the herds and then torrential floods polished off the remnants in 1862. More than fifty inches of rain fell on Southern California in two weeks.

Some of the Californios lost land because they joined in commercial and speculative ventures being promoted by the Yankees. In 1850, for example, Juan Bandini, José Antonio Aguirre, and Miguel de Pedrorena joined William Heath Davis and a group of Anglo American investors to develop a new commercial-harbor center for San Diego. It was called New Town. Contrary to the stereotype of being economically backward, these Californios speculated in real estate and development ventures. Other Californios lost the money they had invested as the commercial life of San Diego went into a depression not to be revived for another twenty years. A slump in the price of cattle due to new competition and a decline in gold mining in the north during the late 1850s made things worse.

Squatters, mostly Anglo immigrants but also including some opportunistic Mexicanos, moved on to the unfenced rancho lands to lay claim to what they hoped would be declared public domain by the courts.

Adding to the Californio woes were the rising property taxes on land. Under the Mexican regime, taxes were levied on the produce of the land, not its market value. Even if they did not have clear title to the land the rancheros had to pay property taxes of eight dollars per one hundred dollar valuation by 1856, a rate that was increasing yearly.