In good times, this is literally a license to print money (well not absolutely literally, they are just numbers on a screen, but as close to literally as you can get). Presumably they have this power because they were meant to lend wisely. But they didn’t, partly because of government regulation and encouragement, but also partly out incompetence and greed.

Without this system, you might still see growth (in fact, I am sure you would still see some growth). The only difference would be that lending would be more transparent. Depositors would know how much money they had available on-demand, and what money was being put at risk through lending. Some would choose to have all money on-demand and just pay a service charge to the bank. But I imagine plenty would be interesting in risking some of their capital in return for interest, whose rates would then be set by the market rather than a central bank.