The money is not tied up in bonds. Because those bonds are liquid and can be sold on the market in exchange for dollars. And when depositors ask for their money

The money is not tied up in bonds. Because those bonds are liquid and can be sold on the market in exchange for dollars. And when depositors ask for their money the bank is forced to sell those bonds at a big loss to get dollars. That results in assets < liabilities. Which is insolvency.