The JPMorgan Chase & Co CEO made the crisis over the bank’s trading loss of at least $2 billion far worse because he had assured financial markets back in April that news reports about massive bets the bank’s Chief Investment Office had taken were “a tempest in a teapot”.

It meant that when the bank disclosed the big and probably growing loss on May 10, it not only had to admit a sizable problem, but also that it had been misleading investors.

The context of the “tempest” comment changed the whole dynamic of the bank’s response, according to a source familiar with the bank’s thinking. It was one of the main reasons that Dimon was so blunt in admitting just about everything was wrong with the situation — he said the hedging strategy was “flawed,” there was “sloppiness” and that “egregious mistakes” had been made.

The approach gets high marks from crisis communications experts, who said Dimon did the best he could with a bad hand, albeit a hand that he was involved in dealing himself.

His problems may not yet be over. He has agreed to testify before Congress and the bank faces probes by reglators and shareholder lawsuits. But at least getting out in front of the news has made it more difficult for his critics to paint him as a banker-villain.

“One of the tried and true rules of this kind of communication is, if it’s not going to end well, try and end it on your own terms,” said Michael Robinson, of Levick Strategic Communications and a former U.S. Securities and Exchange Commission public affairs and policy chief.

“In 2012, there is, in the court of public opinion, a pretty healthy percentage of people who want to see bankers get their comeuppance. And I think he recognized that and went on there to say ‘OK, the buck stops with me, we made a mistake and we’re responsible, and we’re going to fix it,'” Robinson said.

In response to questions concerning its public relations strategy, the bank said it wanted to be open and honest and admit its mistakes.

Dimon has long been unusual among Wall Street executives for his plain-spoken manner. In the hours after announcing the bank’s loss, Dimon called many journalists to discuss the matter. It was unusual for an executive under fire, but characteristic of Dimon.

“Jamie Dimon came out quick, and that’s a big plus,” said Kenneth Makovsky, the CEO of the public relations firm Makovsky and Company. “Ultimately you’re talking about the reputation of a business and nothing disappears as rapidly as reputation.”

The approach won praise from Lucas van Praag, the former head of Goldman Sachs’s public relations department. Van Praag for years had to defend Goldman’s behavior and comments by the firm’s CEO Lloyd Blankfein from its many critics.

“My observation is that they are trying hard to be open, to minimize any further surprises, take decisive action to correct mistakes, make their most senior executive available, stay calm, and not burn any bridges,” van Praag said in an email.

“From a communication perspective, the approach is smart, although I’m sure their legal team would probably rather pursue a bunker mentality.”

POTENTIAL PITFALLS

Indeed, there may be a downside to the straight talking.

Given the threat of shareholder lawsuits — and several have already been filed — securities lawyers and crisis managers both said executives would be well-served to avoid phrases like “egregious errors.”

The Merriam-Webster dictionary defines egregious as conspicuously bad or flagrant.

Gerry Silk, a plaintiff’s attorney with Bernstein Litowitz Berger & Grossmann LLP in New York, called Dimon’s comments a potential liability.

“‘Egregious’ really represents a departure from anything that would be acceptable conduct, and I think the lawyers are going to carefully focus on that because under the securities laws, such egregious and reckless conduct could lead to a finding of violations – could,” said Silk.

The once teflon CEO is also likely to become a much less formidable lobbyist for the banks in Washington, undermining the industry’s attempts to blunt the effectiveness of expansive regulatory reforms.

Dimon’s effusive apology has also fed suspicion among critics that Dimon is trying to avoid too much focus on the reasons for the loss, which many see as being the result of an aggressive trading mentality in an area the bank was supposed to have been conservatively hedging.

“What they’re really trying to do, I think, is divert attention from the fact that this was not an outlier event, this is normal,” said Chris Whalen, a senior managing director of Tangent Capital Partners in New York and a long-time banking industry analyst. “There’s no way that these guys were hedging. They were trying to make money.”

Some experts also warned that it is too early to say whether JPMorgan’s communications strategy is working.

The bank still faces probes by regulators and the FBI, it still has to explain why it misled investors about the risk that was being taken on by the CIO operation, and it still has to tally up a final loss figure — which will take some time and could easily be north of $3 billion.

“If you’re a high-wire act like that, and you get hit with something like this, you fall completely on your face,” said Fraser Seitel, a public relations consultant who was the public affairs director for Chase Manhattan Bank in the 1980s. “And he recognizes that, I suspect, so it’s going to take a long while for him to be respected and to get his credibility back.” DM

Photo: JPMorgan Chief Executive Jamie Dimon in New York January 13, 2011.  REUTERS/Jessica Rinaldi