You're referring to a simplified description of the effect of a 10% reserve requirement on the money supply. If you deposit $10 into a transaction account, the bank may lend $9 of that (not $90), and only if you assume each dollar lent is deposited into a transaction account with the same 10% reserve requirement do you get the net effect on the entire money supply (mostly through other banks) of +$100.
In practice this does not happen. And in any case, no one lends money they don't have, as you put it, unless you have strange ideas about what constitutes money.
Yes, that is correct, individual banks do not loan out money they do not have, but the collective system does.
And I gathered that he wants to be separate from that system and therefore not take part in fractional reserve banking.
If he were to explain in detail how he would have 2-3x more reserves than the banks and not take part in the fractional reserve banking system, he would clear up some of the confusion.
Which, for the record, isn't full-reserve (the legal limit is 900% leveraging... i.e., if I deposit $10, the bank can loan $90 off of that). He'd still be loaning out money he doesn't have, and he'd still be able to generate revenue from that.
In the case of full-reserve banking, you can still make money. You may not be able to offer FREE CHECKING and free x x x x blah blah blah, but with the interest accumulated from your loans, a decent amount of working capital, and fees from accounts it's definitely conceivable.