Since they can loan out much more than they get in deposits that’s not strictly true right? You can have 10 house loans for every house sized deposit (or something similar).
The 10x multiplier is on the bank's equity. For every dollar of home loan there is a dollar or more of deposits.
The multiplier effect of fraction reserve occurs over iterated loans and depositing. The fraction term comes in because the bank can lend out a fraction, less than 1, of deposits.
The real problem with failing banks is that interest rates rose steeply, and thus the MBS devalued by a significant amount.
The OP thought 10dollar of loans existed for every 1dollar of deposits. That is what I address. Instead for every say 9 dollars of loans there exists 10dollars of deposits.
You are agreeing with me. The outstanding loans are/should never be greater in value than the outstanding deposits. Aka: they should be a sub 1.0 fraction. Of course the fraction reserve aspect is the inverse ratio, itself also below 1.0.
But they're going to use depositor funds first because these days those funds are available at a virtually 0% rate.