So then you'd have to get a retail or institutional investor who JUST PURCHASED shares to lend them to you to short.
In which case, why would they bother buying them in the first place.
If the short to long ratio gets too close, they will close out shorts or try to borrow from other clearing firms so that they don't end up naked. Early on, most firms will just close the short.
I don't think what you said is 100% true either. Charles Schwab brokerage definitely asks before lending out, advertises the interest the borrower is willing to pay on the loaned shares, enrolls the willing lender into Schwab Securities Lending Fully Paid Program, and then buys an insurance policy from Lloyd to cover counter-party default. All of this is done via FedEx letters and hand-written signatures.
Sounds like some brokerages don't ask and keep the fees and accrued interest to themselves, which is shady. ETFs and mutual funds don't have to ask anybody, of course, and usually pass on revenue from securities lending to their customers via lower fees.
Cash accounts are different creatures.