How would that work? You put money in a bank, the bank can only keep it in the vault, sitting there doing nothing waiting for you to take it back, unless it can lend part of it out. Thus fractional reserve. Loans existed before banks, but fractional reserve is the whole trick behind banks. Banks started out, I believe, as as goldsmiths[1]. They were places where people paid to keep there gold and and other valuables, and got a receipt for the deposit. These goldsmiths also loaned their own money to people at interest. Eventually some of the more risk taking ones decided that since not all depositors would come for their money at once, they could lend some of deposits out at interest. Modern banking was born.
