Banks are legally permitted to lend (create) money with less than 100% reserves. That’s the whole intent.
Whereas in public markets, a random hedge fund should not be able to essentially issue new shares / increase the float.
My point is simply a ban on “naked shorting” is obviously useless if you allow chain lending, therefore a ban on naked shorting implies a ban on chain lending.
There is no ban on what was done. You don't understand the SEC regulations on naked short selling, which specifically allow the fund activity on GME.
As you wrote, the rules were created because this activity is the whole intent.
Go carefully read the SEC rules regarding this, specifically the exemptions which are written in law.
As I posted above, there is nothing illegal, immoral, evil, or deceptive about these practices. It's only when people don't understand the rules and most importantly why the rules are what they are that those people get upset.
It's like watching natives throw rocks at the moon to scare it off.
Whereas in public markets, a random hedge fund should not be able to essentially issue new shares / increase the float.
My point is simply a ban on “naked shorting” is obviously useless if you allow chain lending, therefore a ban on naked shorting implies a ban on chain lending.