"running [someone] ragged" is a phrase which means making someone work harder than humanly possible (working them so hard they become rags). It's not meant literally, but figuratively it means they were running around looking for this and that and trying to keep up with the crazy requests being made of them.
So "Volcker ignored his department" means "Volcker ignored his staff (and put then in idleness)?"
BTW, does "Greenspan put" mean "Greenspan said"? (Context:
Volcker, Greenspan, and Bernanke would all admit that the Cult of the Chairmanship is overdone in a way that is perilous to the financial markets. Why? Because market participants develop false expectations that, however brutal the crisis, the central bank can always step in to save the day (under Greenspan's tenure, this expectation of Fed intervention became known as the "Greenspan put,"
an insurance policy or guaranteed floor in the minds of stock investors).