Very important to note - a stablecoin running a "fractional reserve" in the way that people talk about would just be fraudulent/insolvent.

Modern banks have actually never operated under the "fractional reserve" model as described in economics textbooks, but it's true that they only a fraction of their assets are held as bank reserves. Very importantly though, solvent banks always have more assets than liabilities (customer deposits are a liability to the bank). Usually a lot of those assets are loans, but they also hold bonds and other investments.

If Tether has issued a single token without an asset to back it that is worth at least US$1, then that's not operating like a bank does, it's just fraud.