It's called fractional reserve and has been happening for years since we ever departed from a gold standard. Welcome to the post Nixon era
Fractional reserve banking existed under the gold standard. There were many bank runs and financial panics in the U.S. when the dollar was fixed at $20/oz. That was the reason for creating the Federal Reserve.
BTW, I believe that we will see fractional reserve banking with Bitcoin, too. And, that is why I don't think a bitcoin will ever be worth $1 million.
It is a very common and widespread misconception to think that banks are somehow limited by the deposits that they have received (what fractional reserve is essentially about).
So you are saying that this is a misconception: 12 CFR Part 204 - RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS (REGULATION D)