The bank would have no capital to lend at fractional reserve. It could not lend out 90% deposit value without getting run on, because there is no deposit insurance. There is no M1 money supply growth coming from the central bank. You would be buying a bond but also necessarily acknowledging the possibility of default, unlike today in the funny money world of perpetual debt money.
Fractional reserve banking predates deposit insurance by hundreds of years. All of what you say was also true about gold, which was of relatively static supply.
