If read up on it, it wasn't really banned. When the FDA came into existence there were already plenty of products on the market that hadn't been through FDA testing, or perhaps any thorough testing. Eventually the FDA looked at mercurochrome, and eventually moved it into this 'untested' category, which essentially meant that it isn't available.
It can be moved out of the 'untested' category, if someone, you know, tests it.
It'll be unpatentable, therefore the expense of testing it will never be worthwhile. That's not really the FDAs fault, although (and this will be unpopular) there is a good argument in favour of 3rd parties testing drugs and receiving funding to do so. Might help with making sure that the testing is accurate, that baselines aren't shifted, that proper outcomes are monitored and that data is available for scrutiny.