Is time running out for USG (USG ) (USG)? Shares in the No. 1 maker of gypsum wallboard got hammered in early October, falling from 70 to 58 in two weeks as fears about asbestos liabilities resurged. By Oct. 25, when USG posted good third-quarter earnings, the stock had edged up to 60. But asbestos still haunts the company. “There is substantial risk in USG shares, which could depreciate by more than 50% [in the absence of asbestos litigation reform],” says Jim Barrett of investment firm CL King. In June, 2001, USG filed for Chapter 11 because of asbestos litigation at its U.S. Gypsum unit. What may save USG is Senate Bill 852, creating a $150 billion trust fund to pay asbestos victims over 30 years. But opposition from some members of Congress and private groups have postponed its submission on the Senate floor till early 2006. USG and the Asbestos Alliance, comprising 57 CEOs, have urged the Senate to act promptly. But whether the bill will pass is “too tough to call,” says Barrett. Matt Kibbe, president of FreedomWorks, a free-market advocate, believes “the asbestos bill is virtually dead [because] both Republicans and Democrats oppose this huge bailout.” The big question is USG’s liabilities: Asbestos lawyers claim it is $5.5 billion, vs. USG’s asbestos reserves of $1.06 billion. In its 2004 annual report, USG warns that risks “remain great” and that investments could be “diluted or even wiped out.” Excluding asbestos, Barrett sees USG earning $9.82 a share in 2005 and $11 in 2006. Tom O’Brien, chairman of the Coalition for Asbestos Reform, which is opposing the bill on behalf of small and midsize businesses, says the fund has a “highly uncertain revenue stream” and will be short by $160 billion — and “broke in three years.” Value Line’s (VALU ) Craig Sirois says “the issue is too risky,” so investors should take profits.