So fractional reserve banking, once they hit reserve fraction they can't legally lend more cash out right?
This also doesn't occur with shares, you either own the share to lend or you don't? There are no new shares created only loans on a fixed amount of shares in circulation unless the company issues more shares, right?
You don't own the share you lend as in it's no longer your property, but you own a new contract claim against the brokerage house whom you lent to. As with any loan, this is newly created financial property. It acts and is priced like the original share, plus additional compensation for the risk (payment for share lending).
It's not the same as company issuing a new share since there is no voting right and there is no SIPC insurance. But in all other ways, financially, it's as if the brokerage created a new share. Real share owners can lend again, so one real share can leverage into any number of outstanding synthetic shares. The only thing holding leverage in line is the margin requirement, and how many people who lent real shares want their loans back.
This also doesn't occur with shares, you either own the share to lend or you don't? There are no new shares created only loans on a fixed amount of shares in circulation unless the company issues more shares, right?