> The whole point of fractional reserve banking is a $100K house being held represents a modest return during a housing bubble, but they could turn that $100K property into $1M of mortgages with a likely higher total return.

That is a significant misunderstanding of fractional reserve banking. Banks can only lend money they have, i.e. that customers have deposited. They can't just invent money to lend. So, a bank with $100,000 in cash can only make loans totaling $90,000 with it (assuming a 10% reserve requirement).