Talk about history repeating itself… 

#-ad_banner-#The term “banksters” originated in the 1930s, and it was used to describe dishonest or greedy bankers at the height of the Great Depression.

Fast-forward more than eight decades, and the term has been dusted off to describe the executives at some of American’s biggest banks who helped precipitate the 2008 financial meltdown by using impossibly large amounts of debt leverage and creating worthless synthetic derivatives that turned customer dollars into casino chips.

Some of the abuses by reviled modern-day banksters have been curbed. But the largest U.S. banks have few friends remaining, and their business models are under assault at nearly every level by regulation and digital innovations.

Today, one of the few things worse than being a victim of banksters is being a long-term shareholder of three of the biggest U.S. banks — Bank of America (NYSE: BAC), JPMorgan Chase (NYSE: JPM) and Citigroup (NYSE: C). 

Their businesses are likely facing an accelerating decline… and possibly, the point of no return. In fact, big banks seem to have woken up lately with targets on their backs — perhaps they are going from “too big to fail” to “too big to miss.” 

It’s not just the Department of Justice, the companies and consumers the banks allegedly cheated, or the crushing regulatory oversights that the banks brought on themselves that are the problems…

Big banks are clearly being disintermediated by the nation’s changing digital economy.

According to TechCrunch, a majority of Americans could be using some form of non-traditional banking services in the next three to five years. 

One of the biggest vulnerabilities in the big banks’ core lines of business is consumer lending and small-business lending. After years in which it was extremely difficult for even prime customers to get a loan, even though interest rates had plumbed rock-bottom depths courtesy of the Federal Reserve, it’s no wonder.

Thanks to the Internet, now there are established ways to connect people who need a loan with those who have capital. Peer-to-peer lenders like Prosper and Lending Club are on the rise. 

For example, Lending Club took five years (from 2007 to 2012) to reach $1 billion in loans — but the company has since reached $4 billion in loans and is planning an IPO next year. 

Clearly, it’s too late to get the genie back in the bottle when it comes to the threats against big banks’ consumer and small-business lending operations. 

The payments ecosystem is also under assault, which is only being accelerated by the mobile and tablet revolutions and the utter lack of brand loyalty by younger Americans. Who cares about that big bank’s airline rewards card when a crush of companies as diverse as Square, Amazon.com (Nasdaq: AMZN), Groupon (Nasdaq: GRPN) and Intuit (Nasdaq: INTU) are putting consumers and small businesses in charge of their own payment processing?

But wait: Bank of America, JPMorgan Chase and Citi still hold the trump cards when it comes to easy ways to get cash, right? Their branch and ATM networks surely have seemed impregnable — Americans can scarcely go three blocks in any direction without seeing a familiar big bank logo on the corner.

Actually, thanks to the emergence of surcharge-free ATM networks, many consumers now have easier access to ATMs outside of the omnipresent big-bank branches. 

A recent study from Accenture found more than 1 in 4 customers would consider a branchless digital bank. Add to that such meaty tidbits as the fact that Costco Wholesale (Nasdaq: COST) already offers mortgages and investments through a third-party lender, and Home Depot (NYSE: HD) offers home improvement financing up to $40,000 through a financial partner — and it’s no wonder the workers at many bank branches appear idle these days when you walk in.

But hey, all of that’s OK because the biggest banks still earn huge profits with their investment banking businesses, right? 

Actually, no. Big banks are being affected not only by poor economic conditions, but also by the choke collars placed on them by the Dodd-Frank Act, the global Basel III standards and other regulatory changes. 

The new rules have restricted the ways big banks can make money through proprietary trading, even while they have also imposed higher capital requirements. In essence, banks are being pushed by Washington regulators to contract or discard investment banking businesses.

Add to all of this the many billions of dollars in fines that big banks have paid to the Department of Justice in recent years to settle a seemingly never-ending parade of charges, and it’s hard to justify owning the stocks of the majors.

Risks To Consider: Some of the biggest U.S. banks use notoriously opaque accounting to dredge up profits where none are expected. That may help them stave off their decline, at least in the short term. If interest rates rise, the spreads in some cases could boost bank lending profits.

Actions To Take –> Consider buying long-term put options on BAC, JPM and C. For those with a medium-term horizon, inverse banking ETFs may be good ways to play this theme. Under no circumstances should you own these stocks for the long haul.

Using a similar options strategy, my colleague Michael Vodicka has found a way for regular investors to collect more retirement income than they’ll ever need — in three easy steps. To learn how to multiply the income you collect from the world’s most reliable stocks, follow this link.