Now that would be a valid argument if real world free markets were perfect markets or nearly so. The reality however is that the authorities thru history have never had good control of dishonest bankers. And as for the levels of criminality over the last ten years amongst bankers, that has reached record levels.
Now if you face the choice between a bank offering you interest and an ostensibly honest bank offering you zero interest combined with 100% safety, there is little reason to trust the latter. That is, the reality is that you face a small chance of losing your money whatever you do, so you might as well plumb for “small chance of total loss plus interest” rather than “small chance of total loss with no interest”.
That certainly helps explain the scarcity of full reserve banks thru history.