Explaining Southern California's economy

Carlyle Group buys TCW, and the Euro crisis comes home

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TCW was just bought by the Carlyle Group, a huge private-equity firm. The sale could helo TCW and former parent, struggling French banking giant Société General.

The Carlyle Group, one of the world's biggest private-equity firms, is buying TCW, an institutional investment management firm based in L.A., with roughly $130 billion on the books and a good reputation for fixed-income. In fact, the bond side of what TCW does is such a big part of the business (about 60 percent) that David Lippman, who ran fixed income for TCW, will become CEO of the new, Carlyle-owned enterprise. 

The last thing that popped TCW onto the radar was a meltdown in 2009 that involved its star bond trader, Jeff Gundlach. But there's a meltdown behind the Carlyle deal, as well. And it's all about how TCW former parent, French back Société Générale, is suffering from the ongoing eurozone crisis and from the aftermath of the financial crisis.

Banks around the world are now required to basically keep more money in the vault (so to speak). It's called the "Basel Accord," and it's now up to its third iteration, Basel III. SoGen, France's number two bank, is in the process of bolstering its balance sheet and cutting lines of business in order to comply with Basel III. It's been a rough time for the bank, which is suffering from its exposure to Greek debt — it wrote off three-quarters of its investment last year.

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