Whether we like it or not, banking makes the world go round.
Did you know banks create money? Yes, that is right, lending and interest gained is what increases values and creates money.
(Now before you say that countries' actually create their own money, they don't. The print/mint currency that is a physical representation of money, but that is not money. If you disagree, ask yourself why is there about 10x more wealth in USA dollars then currency to represent it?)
But anyway, I truly believe that congresses' overreach in 2009 with the financial industry is what is holding our economy back. I don't agree with all deregulation (especially environmental), but I think Dodd-Frank did much more harm then good and these regulations need to stop.
Credit creation is the process you describe above. It's not the interest gained, but in a closed system when you lend money, some of that money ends up being deposited again and then the banks can lend it again. The credit creation ratio is important and the value of it forms part of the money in an economy. By controlling capital adequacy ratios, governments can control credit creation (also through other means such as interest rates but that is indirect control).
Your second point isn't really right. Currency is a part of broad money which includes other things of value in the economy such as bank deposits and other representations of value typically with a maturity not longer than 2 years. There are numerous definitions of money to suit different needs, but they all include the notes and coins (cash) in the economy which is real money. What that money is worth compared to other currencies or in terms of buy power changes such that just printing more money simply increase inflation (quantitative easing, as it has been know since the GFC, is literally the act of creating more cash and therefore more money in the economy and therefore reducing the value of the money - if money is less valuable you pay less for it - lower interest rates. You also enable inflation to stop stagnation of an economy in a super low (or even negative) interest rate environment).
And, contrary to your view of over regulation, it was strong prudential controls that largely saw Australia avoid the GFC in the sense that we didn't go into recession because our major banks were financially sound. Our last recessions ended in the September quarter of 1991 - just coming up on 26 years ago. How you control and regulate your banks is a worthy discussion, but suggestions that you need to deregulate to help the economy is demonstrably false in the long term. That doesn't mean you need excessive controls and regulations, but you need banks to be kept within a reasonable bound because they're not just "another business" - they're in fact the core of all business and financial activities and have a role beyond that of a simple commercial enterprise.
