A baby girl was born in a Louisville hospital last May, a few minutes before midnight, to a 27-year-old letter carrier named Elizabeth. It seemed a routine, uncomplicated birth. Not quite.

"I looked at the baby, between my knees down there, and my first thought was of the mother," says Elizabeth. "There were tears runnng down her face, and she wouldn't let go of my hand. All she could say was, 'Thank you.' "

Elizabeth, a surrogate mother, had been artificially inseminated with sperm from the woman's husband nine months before, and had signed a contract agreeing to give the couple the baby for $10,000. The woman was infertile and, Elizabeth says, "This was the only way she could ever have a child."

The two hardly knew each other, but in this delivery room, where the traditional bonding of mother and newborn had been turned upside down, these women formed a bond of their own.

"They put the baby in a little clear cradle," says Elizabeth, "and I looked over at her and thought, 'What if I regret this?' And I said, 'No. That's just not mine. I'm not going to psych myself into believing that I'm giving up a child.' "

Then the nurse looked straight at the baby and said, "Do you want to hold your daughter?" There was a half-beat of silence. Elizabeth recalls that she turned her face toward the woman, who knew what to do.

"Yes," said the woman, "I would."

On the one hand, surrogate motherhood seems only as mysterious as the giving of life. Once out of the delivery room, it gets more complicated.

In the past three years, doctors, lawyers and entrepreneurs have turned what they say is an informal practice as old as the Bible into a profit- making business. Now there may be as many as 10 surrogate-mothering agencies across the country, all designed to match up infertile couples with fertile women willing to bear them children.A couple can pay anywhere from $20,000 to $45,000 for the whole procedure, including psychological counseling and all medical and travel expenses; the surrogate mother usually gets about $10,000 of that. After the baby is born the surrogate mother relinquishes her parental rights. The father then assumes custody with his wife, who adopts the child.

Surrogate motherhood invites endless "what ifs," and in January, a Michigan surrogate named Judy Stiver hit them all. She delivered a child with a birth defect whom the father, Alexander Malahoff, didn't want. Blood tests, announced in peculiarly American fashion on the Phil Donahue show, proved that the baby was actually the son of Stiver's husband, Ray. The Stivers took the child as their own.

The Stiver case started a new debate about this legal no man's land. (Lawyers for surrogates get around laws against "baby selling" by arguing that the mothers are selling a service, not a child.) Fewer than 100 babies have been born to American surrogate mothers in the last few years, but bills already have been introduced in Michigan and other states to either regulate the arrangement or ban it entirely.

At a time when one out of five American couples can't have children, and when birth control has made available white babies increasingly scarce, surrogate motherhood raises questions about racism and genetic selection. What is the monetary value of a child? What are the ethics of a couple asking for--and getting--a mother who is blond, blue-eyed and slim? How far should an infertile couple go to get a baby who looks like them?

The moral implications are enormous. Many people find them unfathomable; some find them grotesque. Still, the issue doesn't break down along conventional class or political lines.

"I am myself a liberal," says David Riesman, the Harvard sociologist, "but there are certain prevailing pieties on the issues that involve inheritance, race and class that people react to without thinking it through." Riesman, who says he has never met a surrogate mother, nonetheless thinks it's a good idea. "What it says is that one wants to know something about the mother of the adopted child. These families don't want to play a lottery."

Michigan State Sen. Connie Binsfeld, a Republican who introduced a bill to ban the practice, says, "My whole thrust is on the protection of the child. They're exploited, and they're denied the love and bonding of a natural mother for money."

Gloria Steinem, the editor of Ms. magazine, views it as a "morally neutral act" but adds that "what seems to come first in the cases I've read about is an obsession with sperm and paternity. And if men could give birth, they'd be charging millions of dollars--and they'd have a cartel."

And Dr. Benjamin Spock, the legendary pediatrician from the baby boom, says: "I don't see anything wrong here. But a pregnancy is very hard work, and nine months is a long time. Ten thousand dollars is a very modest fee."

The most interesting person in the equation--and, some would argue, the most victimized--is the surrogate mother. She is typically a working-class woman, providing her "service" to middle- and upper-middle-class couples. Her real motives are not nearly as economic as her critics say--nor as altruistic as she tells the talk show hosts.

Three mothers were interviewed for this article: Elizabeth, the surrogate mother who gave birth to the child in May and now is trying a second time with yet another couple; Joan, an unmarried second-year law student at Temple University in Philadelphia, who is scheduled to be inseminated at the end of this month, and another Elizabeth, this one from Joppa, Md., who is due to give birth to a child for a Colorado couple March 23. Although all three surrogate mothers agreed to have their pictures taken, they are worried about harassment and so asked that their last names not be used. As one of them says, "I once called a hospital and told them I was a surrogate mother, and asked if they would consider treating me. And the nurse said, 'We certainly would not.' " Elizabeth

It is Valentine's Day, and Elizabeth has just flown from the West Coast to Louisville for three days of inseminations. She is pretty, slender and blond, dressed in faded jeans and a plaid shirt. The first couple chose her, in part, because of her fair hair and skin. She has been through a number of inseminations before, and she appears no more concerned than if she were coming in for a routine pap smear--which is not that different from the insemination procedure. But as she opens the door to Dr. Richard Levin's downtown Louisville office, she grimaces.

"This is the part I hate," she says. "You never know if he's in here." She means the father. As she'll say a little later: "I worry about it, because accidents can happen. The father brings his sperm sample in. If he comes in at 3 o'clock, you come in at 3:30. But if takes him a little bit longer because of the tension or whatever, he may be walking out. I always worry about the father romanticizing about the woman who carried his child, and ruining his marriage."

Twenty minutes later, she's finished. She comes back into the waiting room, a standard doctor's office with People magazine on the end tables--and in this case, on the wall. Right above a couch hangs a blown-up reprint of a 1980 article on Elizabeth Kane, Levin's patient and the pseudonym for the first surrogate mother to go public. Soon Levin himself comes out, says hello to his patient, then hugs her.

Elizabeth has three children of her own. She lives in a trailer house in a western state. As a child, she says, she was "sullen" and "withdrawn." She has a high school education, got married when she was 18, and was divorced at 26. Her husband was an electrician. "He said what I wanted to hear," she says. "He made me feel special. Well, that's all fine and dandy, except you can't keep that up the rest of your life. It got kind of cruddy after a while. He was just like my dad. Not so much strict, but harsh and calculating."

Now she has a new boyfriend. She says they'll get married after this pregnancy.

Once the insemination is over, she goes to stay overnight at the home of Susan and Bill Gardner, family friends who help Levin part time. Elizabeth has some chicken soup, curls cross-legged into a lounge chair, then pulls a blanket around her. For the next two hours, she details her pregnancy.

"I loved being pregnant the last time," she says. "I was so happy. It was the most stable time in my whole life. I had a purpose for being here. And that's been my whole hang-up since I was a little kid. Why am I here? Just so my dad can yell at me. Just so my husband can criticize me. Just to take care of my kids. But these people needed me. It made me somebody. I told the parents that that baby did more for me than I ever did for them."

After her first two children, at age 20, she had an abortion. Two years later, when she saw pictures of fetuses at an antiabortion booth at a local fair, she regretted it. She became pregnant with her third child--against her husband's wishes--but that didn't help her sense of loss. "I found out you cannot replace a child that you have . . ." She pauses. ". . . killed. I've decided it was a girl. And when I get to heaven, she's probably going to be standing there saying, 'Mom, why'd you do that? Why didn't you give me a chance to live my life, and do what I wanted to do?' It really makes me feel rotten.

"People have wondered why I won't regret this, giving up the baby. And that's very easy to answer. When you kill a child, when you have an abortion, you've terminated something. You've murdered somebody--it's cruel, it's horrible, it's terrible. But when you do something out of love, when you carry a child for somebody else, and turn that life over to them to be cared for, you haven't done anything bad, and it's nothing you can look back on and regret. It's good."

She says she still thinks of the last baby she carried. "I used to think about her every day and wonder what the parents were doing. Are they getting up at 2 o'clock in the morning? And now I think, she's--nine months old? Nine months old. Starting to walk. Pulling pans out of the cabinet, banging them on the floor. Doing all the cute stuff that babies do that drive me right up the wall. I would never want to raise another baby.

"It's like a niece. I love her, and I always will, but I'm not obsessed with seeing her. If she wants to see me, that's fine. I'd love to see her. But she doesn't need some woman slinking in the shadows, watching every move."

Elizabeth spent her $10,000 fee within a few months. Most of that went toward bills and a vacation with her children. But she says she'd do it without the money. Now she wants to use the next $10,000 to begin building a house.

She recalls the first time she saw the father. It was in the hospital, and "he was, ahhh, plain," she says.

Not her type?

"Not somebody I would ever pick up off the street, if that's what you mean," she says, and laughs. "But I have to admit I was very curious."

What if he'd been attractive?

"Then I would have been worried," she says, and laughs again.

After the child was born in May, she and the parents talked for hours at the hospital. She asked to see the baby, just one last time, on the second day. They walked to the nursery together. "And I looked at her, and she looked exactly like her father," says Elizabeth. "When we were walking back down the hall, the mother said, 'Well, what do you think?' And I said, 'She's gorgeous. You have a beautiful daughter.' Then she said, 'Don't you think her hair will lighten up a little bit?' And I said, 'I really hate to disappoint you, but I don't think so. Her eyes were black, and her hair was just jet-black. And straight. And she said, 'Don't you think maybe just a little?'

It hadn't been easy getting into the nursery, because the nurse frowned when she saw a surrogate mother. "But she couldn't stop us," says Elizabeth. "Because I had not terminated rights as of that time. In Kentucky it's five days.

"So the child was my child." 'A Giant, Giant Thing'

Philip Parker, a psychiatrist at Wayne State University in Detroit, has studied more than 225 women who have applied to be surrogate mothers. They were referred to Parker by Noel Keane, a Michigan lawyer who sees surrogate motherhood as a "giant, giant thing" and whose clients include Judy Stiver and Alexander Malahoff. One-third of the women have had abortions.

"The need is to repeat the voluntary loss," says Parker. "That's the key. You relive the loss, you reexperience it, you master it so you can control it better. It's a common human trait. We have this need to deal with the unresolved anxiety or guilt."

But this is never the entire reason, he says. His findings show three general groups of motivations: money, the attraction of giving what some surrogates call "the greatest gift" to a childless couple, and the desire to be pregnant for the pleasure and attention it brings. All three motivations, he adds, work together.

In one group of 50 applicants he studied, only one had a college degree. In another group of 120 applicants, 69 were Protestant, 50 were Catholic and one was Jewish.

Parker says he has found it usually helps the mother to meet the couple who will raise the baby. "But the feeling of empathy--'It's their child, not mine'--is never totally successful," he says. "In fact, there usually is a grief reaction with the women I'm following. So far, there have been no severe psychiatric reactions when a woman gives up the baby. I mean, no one's ended up in a psychiatric hospital. But it's only a matter of time."ufstsubhdJoan

Joan has selected Frog, a trendy restaurant in Philadelphia's Center City, as the spot for an interview over dinner. She is 24, a second-year, night law student at Temple University and a full-time office manager for an executive placement service. Her blond hair is pulled straight back from her face into a tight bun, and her dress is a conservative blue stripe, belted at the waist. She is carefully made up. She has been matched up with a couple through Philadelphia attorney Burton Satzberg's Surrogate Mothering Ltd. Before she orders her vodka and tonic, she explains her perspective on the arrangement.

"Most of the women charge around $10,000," she says, "but because of my educational background and other qualifications, we felt I could charge slightly more. I was thinking originally of going for $15,000, but then Burt and Howard Adelman, who's a clinical psychologist for the group, felt that I may be pricing myself out of the market. So I felt $12,000 was a safer figure, because I didn't want to charge a tremendous fee and end up not getting anything."

She doesn't see it as baby-selling. "If I were selling a baby, and if we found out I was carrying twins, I should really be getting double my fee," she says. "And I'm not. Even if I have triplets, I'll still get $12,000. It doesn't matter. If I were selling it, I'd charge $50,000. Even a million."

Should she miscarry between three and five months, she gets 25 percent of her fee. Between five and seven months, she gets 50 percent, and between seven and nine months, 100 percent. If the baby is stillborn, she still gets the full amount. She is scheduled to be inseminated at the end of this month.

She grew up in Reading, Pa., a product of Catholic schools. She wasn't allowed to date. At 5 feet, 4 inches tall, she weighed 200 pounds. "I was a porker," she says. She went to Boston University, and during her first semester lost 75 pounds--then found a boyfriend. She broke up with him, went to law school, worked part time as a waitress and fell in love with the restaurant manager. In June she had his child, Jason. He said he wasn't the father, so she filed a paternity suit. It's still in court. Her son is living with her parents in Reading. She sees him on weekends.

In September, when it was clear that Jason's father was turning out to be, in her words, "a crumb," she answered an ad for surrogates in a neighborhood newspaper. "This is making me feel better, because I'm helping someone else," she says. "The hurt comes upon me late at night when I'm lying in bed alone, and I can't sleep. This will give me something else to think about. It's a different way to occupy my time. I don't know. If I were still seeing him, it probably would be a big turn-off to him to know that I was pregnant with someone else's child."

Her ambition is to be "a rich lady executive." She describes herself as "power-hungry," a trait she doesn't think is at odds with surrogate motherhood. "It's just something else I'm doing that asserts my independence," she says. "The couple that chooses me really has to do it on my terms."

Meanwhile, she's thinking of writing a book. She has also appeared on numerous talk shows and in television interviews. "When I'm talking to the media, the reason I stress more is what I call the humanitarian reason," she says. "You know, I think it's a great thing. But I'm doing it for the money, too. And I'd be lying if I didn't say I was." She wants it for one of two things: a car, so she can live with her son and commute from Reading, or a housekeeper, so she can keep him with her in the city.

"I guess most of the surrogates in this program don't want this kind of exposure," she says, "but I think it's good for me professionally in the long run--because people in this area will be familiar with me, and they'll know what my background is. Hopefully, they will see me as an articulate, well-educated person. And if I can become a celebrity, why not? My parents love it. They say, 'That's my daughter!' On TV!' " The Brokers

Richard Levin, the Louisville doctor, has an office coffee table strewn with pictures of happy babies and accompanying notes from their glowing mothers--in this case, natural mothers he has helped with fertility drugs.

Surrogate mothering is just a sideline of his regular fertility practice. . Once, he said he planned to be responsible for 100 births by 1981, but now he refuses to give a number. The Louisville Courier-Journal surmised last month that the actual figure might be 28. In the meantime, Levin is being sued in two separate cases by couples who have paid him but say he didn't find a surrogate for them.

Is this worth it?

No, says Harriett Blankfeld, who runs the National Center for Surrogate Parenting in Chevy Chase. "This is not a get-rich-quick scheme, believe me," she says. She charges couples $25,000 for the entire procedure, but says some have offered her much more. She says she refused.

Levin agrees, adding, "I never get sued in my fertility practice. Some of the couples come here and expect to find the exact replication of their wife--in looks, intelligence and personality. Anything that deviates from that is less than adequate."

One prospective father, he says, asked that the surrogate mother have breasts that were shaped precisely to his specifications. "Personally," says Levin, "I think that is going a bit far." Elizabeth

The living room of Elizabeth's small house in Joppa, Md., is filled with two dozen pictures of Elvis Presley. There are two life-size cardboard cutouts of Elvis on each side of a lounge chair, Elvis memorabilia behind the room's leatherette bar and, on a chain around Elizabeth's neck, the three gold initials "TCB," intersected by a lightning bolt. Any Elvis fan knows they stand for "Taking care of business--in a flash," Presley's logo.

Elizabeth is 31 and the mother of two children. Since she is so close to her due date, she takes up a lot of the lounge chair. Her husband, Larry, who makes $8 an hour as a sheet metal worker, is home from work early. She says he's going to make a videotape of her delivery. He's listening from the kitchen.

"I worried, getting fatter, 'Is this going to affect our relationship any?' " she says. "But he's been so attentive. At night he massages my back for me. He helps me in and out of the car, and sometimes in and out of the tub. And like the baby will be moving and kicking and I'll say, 'Larry, come here, feel it.' And we have a stethoscope, and we listen for the baby's heartbeat at night. I think it's more enjoyable, because he knows that he doesn't have to support it afterwards."

Did Larry take to the idea right away?

Finally he speaks. "Not totally," he says.

What were his hang-ups?

"I don't have any hang-ups about it," he says.

Elizabeth was born in Albuquerque but was raised on the road. She describes her father, who lives with them now, as "a rambler, mostly." Her mother died when she was 5, and so she lived off and on in Maryland with an aunt. She has a ninth-grade education, and married Larry when she was 15. She was once a waitress, but has never had what she considers a good job. She heard about surrogate mothers on the Phil Donahue show. Around that time, her favorite character on the soap opera "Days of Our Lives" was doing the same thing.

"I had a desire to be pregnant one more time," she says. "My husband had a vasectomy after my son was born. I would have liked to have had one more. And I was pregnant before he had the vasectomy done, and we decided on an abortion. It was a decision we made together, because we couldn't really support another child. But it wasn't really what I wanted."

Larry has quietly slipped out to take the dog for a walk.

"They had you on the table," she says, "and they had the jar that the baby goes into, with the fluids and everything. And they took it over to the sink, and they emptied out the fluids, and then you saw this sac that fit in the palm of your hands, and you knew the baby was in there. And they just took it right next to me, wrapped in paper towels, and threw it in a trash can. And then nights and nights after that I cried and cried. And I wouldn't let Larry know because I didn't want to make him feel as bad as I did. It was just an emotional thing that only a mother could feel.

"And I thought that if I could live through that, and get over that, which I really haven't, then I could definitely give a couple a child that I know was wanted. I don't feel like I'm making up a life that I took, but I do feel like I'm compensating a little for what I did. I guess I wanted to give a life back."

Elizabeth has become friends with the woman who will adopt her child. They talk about once a month, sometimes two to three hours at a time. "It's like talking to my sister," say Elizabeth. "She's very concerned about everything. She feels bad for me when I feel sick. I tell her everything, every ache, every pain. I'm making her as much a part of it as I possibly can. We talk about it as being her baby, not my baby or our baby."

The woman and her husband live outside Denver, on 40 acres of land. The husband owns his own corporation, and they ski at Aspen and Vail. "She does everything different from the way I do it," says Elizabeth. "She once made a comment that they don't eat hot dogs. Hot dogs are one of our main meals." She laughs nervously.

The woman and her husband plan to fly to Maryland for the delivery. Elizabeth doesn't know if she'll ever get to see the baby afterward. "I'm not depending on it, because I'm not going to set myself up for disappointments," she says. "It's their decision, totally. If they don't want me there, then I won't be there."

She says she has no plans for the money. She got $3,000 when she became pregnant, and is to receive another $10,000 upon delivery. "It doesn't do anything, really," she says. "So what's a new car? That's just about the only thing you could really do with it." She would like to buy house, but knows that $10,000 won't get close to covering the down payment. "But because of the feelings that you have and the pain you're going to go through and the comments and the dirty looks you get from people, I don't think anybody could really do the whole thing for the money." Afterward

Not long after the interview, Elizabeth says by phone from Maryland that she's feeling tired, and wants to get the delivery over with. Afterward, when the baby goes back to Colorado, she thinks she knows what will happen.

"I expect I'll cry a few days," she says, "and I'll probably mope around. You have the blues after a baby, even if you've got the baby home in your arms. I think there's going to be times when I'm going to be very depressed. And there's going to be times when I just won't want to talk to people. There are a lot of my friends who are dying to say, 'I told you so.' "