You start a bank, I come to take out a loan and I want it in cash since I am buying a used car this afternoon. You have no cash since you said you don't need it, are just going to create it. Where does the cash come from? If you get it somewhere else, like the FED, you clearly aren't creating it, the FED is, right?

If you need to involve the FED (which you don't as per how I described) then the FED creates the money, not the banks. This invalidates your entire premise.