"Christina Romer, at a speech at the Brookings Institution Monday afternoon, appeared to give support to critics of Treasury Secretary Timothy Geithner who say that he is wrongly treating the economic collapse as a "liquidity crisis" when it is instead a crisis of solvency in the banking system brought on by a collapse in asset prices.

" 'Most obviously, like the Great Depression, today's downturn had its fundamental cause in the decline in asset prices and the failure or near-failure of financial institutions,'  she said in prepared remarks, where she compared and contrasted the current crisis with the Great Depression. The assets in question are, by and large, houses and other real estate.

Asked by the Huffington Post if she specifically disagrees with Geithner as to whether the nation faces a liquidity crisis, however, she said that she does not.

" 'Let me be very clear. No, I absolutely don't disagree with him,' said Romer, head of the president's Council of Economic Advisers. Treasury spokeswoman Stephanie Cutter also said that there was 'no contradiction' between the two economic officials' views.

"Economist James Galbraith, who has been critical of the administration's rescue effort as insufficient, said in an e-mail that "the recognition that the fundamental decline (collapse) in asset prices is the problem firmly contradicts the administration's line that credit is 'blocked' and can be made to 'flow.' The asset price (read: housing price) problem undercuts that completely, not so much by establishing insolvency of the banks, but by establishing the lack of credit-worthiness of the borrowers. Whether Christina Romer recognizes this is an interesting question."

"Galbraith also said that he thinks 'there is a contradiction [between the Romer and Geithner analyses] but I'm not sure you can clearly pin it on the solvency/liquidity dichotomy, unless Geithner has said in plain English that he still thinks it's a liquidity crisis, which I doubt he has done lately though I don't follow every speech. Geithner's position so far as I understand it is that the banks are solvent, though in trouble, and can be rescued by capital infusions and guarantees of their asset prices. Guaranteeing their assets will, in fact, solve a solvency problem -- at gigantesque expense. The fallacy in Geithner's position is that solvency has nothing to do with lending.'

"If the crisis is understood as one of liquidity, then the appropriate response is to continue injecting capital into the banking system and fiscal stimulus into the general economy until asset prices return toward previous highs. Japanese policymakers initially understood their crisis to be one of liquidity and injected hundreds of billions during the 1990s, to little effect. But if the problem is something different -- a solvency crisis brought on by essentially permanent asset-price declines -- then the policy response needed is different.

Japan didn't begin to recover until it determined the problem was one of asset collapse and insolvency. The Japanese government then took over the country's failing banks, wiped out shareholders, fired management, recapitalized banks and returned them to the private market. The takeovers turned the economy around."

However, since Tim Geithner, like his mentor, Lawrence Summer, head of the White House National Economic Council, is an integral part of the corrupt Wall Street culture and can't seem or won't correctly diagnose this crisis because it might threaten his financial cronies who perpetratred the economic catastrophe, then this country and its American taxpayers are being screwed by Geithner's deliberate stubborness, myopia, and misdiagnosis.