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.
That is why I deleted my second part, but I never said that currency is not part of the money, or value, of a certain economy as you imply. In my note, it certainly is along with other things such as interest earned and appreciation of investments. If one decides to liquidate his investment, currency is what he will receive (or a deposit note) and that currency has value reflected in the economy. I just merely stated that money and currency are not the same thing, which many people think.
However I stand by my view that Dodd-Frank has caused more harm then good, along with other overreach. Just like with anything, (our) congress has a tenancy to over-react.
Since Dodd-Frank has been put into place, small banks are disappearing in the USA. The reason is that Dodd-Frank is so massively complicated, you need a staff dedicated to just Dodd-Frank to make sure you are following it. Small banks can't afford this, and so they sell out to larger banks.
On top of that, our large banks have gotten larger since Dodd-Frank has been put in place, which I find to be rather funny since those whom voted for Dodd-Frank want smaller banks.
Ahhh, the law of unintended consequences.
A couple articles:
http://www.politico.com/agenda/story/2016/09/community-banks-dodd-frank-000197 https://www.forbes.com/sites/carriesheffield/2015/02/09/dodd-frank-is-killing-community-banks/#520b9ce73a72
