JPMorgan Chase Co-Chairman and CEO Jamie Dimon is now the public face of a massive trading loss that has humbled the venerable bank. Potential losses of over $2 billion have shattered the Teflon image that helped JPMorgan navigate through the turbulent waters of the financial crisis and emerge, until now, as one of the best managed financial institutions in the United States.

As a result of the enormous error, JPMorgan accepted the resignation of the executive in charge of the unit that committed the error and more senior management departures are expected. Dimon approved the concepts behind the complex trades, but if reports are correct, didn’t effectively monitor their execution. He delayed a quarterly regulatory filing until he had a better understanding of the trades impact on the firm, but information pertaining to who knew what and when has been sparse.

The House Financial Services Committee will soon hold a hearing focused on JPMorgan to determine the implications on future regulations for the financial sector. Advocates of greater oversight over banks and brokerage firms are pointing their disapproving fingers at JPMorgan’s internal controls and are calling for more capital reserves and greater banking oversight in order to avoid the meltdown that engulfed Lehman and Bear Stearns when the financial crisis began.

One of the casualties of this massive trading loss has been Jamie Dimon’s reputation and JPMorgan’s standing among its Wall Street peers. In an unrelated but timely survey conducted by PR firm Weber Shandwick (The Company behind the Brand: In Reputation We Trust — CEO Spotlight), 66 percent of consumers agree that their perceptions of CEOs affect their opinions about the company’s reputation. Additionally, 59 percent of consumers said that they are influenced by the communications from company leaders. The study found that respect for CEOs dropped to 72 percent in the U.S., a declining trend seen for the last few years, that shows no signs of abating.

To Jamie Dimon’s credit, reputation management began almost immediately after news reports broke the story. He took immediate and full responsibility for the losses and vowed a full and thorough investigation. He has granted limited but sufficient access to media and by all accounts has diverted significant time and resources towards an unwinding strategy that will limit the pain for shareholders.

JPMorgan’s vow of transparency will help rebuild their corporate reputation, however they face an unusual dilemma. Unwinding the hedging strategies at the center of the trading loss can become more difficult if the particular details of the trades become known. JPMorgan’s outsized derivatives positions are already one of the worst-kept secrets on Wall Street.

Jamie Dimon has to thread a needle to help JPMorgan emerge with its reputation for prudent risk management intact and to rehabilitate his own public image. The recent loss of investor confidence and share price decline is directly attributable to the revelations of mismanagement at the very top. For the investment and commercial banks enjoying this rare moment of schadenfreude, they are watching a very expensive lesson in reputation management.