Spread 1 lb pinquito beans across the counter to remove any dirt or rocks.
Place the beans in a large container and fill the container with water until there is double the amount of water compared to the beans. For example, if you have 3 inches of beans, you need 6 inches of water. Let beans stand for 8 hours overnight, then drain.
Place the beans in a stock pot with enough cold water to cover them. Bring to a simmer and cook until tender, about 2 hours.
While the beans are simmering, sauté 2 slices bacon slowly in a saucepan until cooked but not crispy. Add to beans.
Cook the 1 tbsp diced mild green chiles and 1/2 diced white onion in the bacon fat until lightly browned.
Stir 1 chopped garlic clovein with the chili peppers and onions and cook for 1 minute. Add 3/4 cup tomato puree, 1/2 cup water, 1 tsp chili powder, 1 tsp salt and 1 pinch finely ground pepper. Bring the sauce to a simmer, reduce heat to low and cook for about 30 minutes.
Drain all but one cup of cooking liquid from the beans, stir in sauce and bring to a simmer.
Reduce heat to low and cook, stirring occasionally, for 30 minutes or until the mixture is thick.