Connectivity analysis of resting-state fMRI has been widely used to identify biomarkers of Alzheimer's disease (AD) based on brain network aberrations. However, it is not straightforward to interpret such connectivity results since our understanding of brain functioning relies on regional properties (activations and morphometric changes) more than connections. Further, from an interventional standpoint, it is easier to modulate the activity of regions (using brain stimulation, neurofeedback, etc.) rather than connections. Therefore, we employed a novel approach for identifying focal directed connectivity deficits in AD compared to healthy controls. In brief, we present a model of directed connectivity (using Granger causality) that characterizes the coupling among different regions in healthy controls and Alzheimer's disease. We then characterized group differences using a (between-subject) generative model of pathology, which generates latent connectivity variables that best explain the (within-subject) directed connectivity. Crucially, our generative model at the second (between-subject) level explains connectivity in terms of local or regionally specific abnormalities. This allows one to explain disconnections among multiple regions in terms of regionally specific pathology; thereby offering a target for therapeutic intervention. Two foci were identified, locus coeruleus in the brain stem and right orbitofrontal cortex. Corresponding disrupted connectivity network associated with the foci showed that the brainstem is the critical focus of disruption in AD. We further partitioned the aberrant connectomic network into four unique sub-networks, which likely leads to symptoms commonly observed in AD. Our findings suggest that fMRI studies of AD, which have been largely cortico-centric, could in future investigate the role of brain stem in AD.