> There is nothing inherently wrong with banks lending out your deposits.
There wouldn't be anything inherently wrong with it 1) if they didn't do it by default 2) if banks informed their customers appropriately, including the risk in doing that (most people don't know what banks do with their funds) and especially 3) if it wouldn't be forced, i.e. if they would let customers choose to keep their funds segregated if they are not willing to take the inherent risk in lending and/or the bank mismanaging their funds (e.g. having the option to have both segregated and normal checking/savings accounts or whatever), so that customers would never be exposed to losing whatever amount they didn't want to (including anything above the FDIC insured amount).
But sure, allow customers to lend their money and expand the economy if they want to. With an appropriate reward for the risk, not a laughable 0% interest rate, which almost nobody would ever take willingly. In fact, the 0% interest rate, or anything below or close to the inflation rate, is a clue which indicates that what they're doing to their customers is wrong and that the customers aren't choosing to take that risk knowingly and voluntarily.
> There are a mountain of regulations that banks have to keep up with and the reason why FDIC insurance exists
You say that like it's a good thing. It's massively inefficient and both "a mountain of regulations" and FDIC insurance are inherently unfair (for several reasons) and have many unintended (negative) consequences.
And it doesn't even actually fix the problem, it just makes it less likely to occur (for starters, because there ends up being much less competition than there would be otherwise -- less banks, less bank failures) but when it occurs, it's an even bigger problem. Which means it also gives a false sense of security.