I used to debate [Libertarians] who think that all fractional reserve banking is fraud. My usual response is to ask them if they really think there actually exists anyone who thinks that when you deposit money in a bank, they put your money in the safe so that you can withdraw it when you want to. I guess I'll have to find a new argument, because it now appears there is at least one such person.
There probably are a small but measurable fraction of account holders who really think the bank holds all their money in a vault. That's the way banks are normally portrayed in popular fiction, after all. However, even those who understand how banks really work tend to assume, deep down, that "their" money will always be available for withdrawal when they need it. Just look at how betrayed people act when there is a run on the bank and they can't get at "their" money.Being a firm believer in caveat emptor, I'm not going to claim that fractional reserve banking is an outright fraud. Somewhere in the fine print the banks do state that your money may not be available immediately on request. However, it's not hard to see why people call it that, or why a strict separation was required between interest-bearing time accounts, like CDs, and fee-based demand accounts.
There are plenty of better exchanges.