Herman Daly is an idiot. He does not understand that banks are not financial intermediaries; they are credit enhancers. A bank extends its own credit to a borrower it has investigated, using money from sources that have investigated the bank's credit. Because the bank's credit is well known (thanks in part to regulation and FDIC insurance), the bank can pay less for credit than it gets for credit.

There is nothing magical about fractional reserve banking. It's just borrowing. The bank borrows money from depositors (and other sources) to make loans. Because the depositors' loans to the bank are demand loans, the bank keeps enough cash on hand to service routine withdrawals. That's the reserve. Why would it keep more?

There's a "fully reserved" vault in the bank's basement for anyone who wants to rent it. That's the money-owner's choice: put the cash in a box or lend it to the bank.