My midwife, with 15 years experience, has attended hundreds of
waterbirths. She has never had a problem associated with the water. She
just scoops the baby up as soon as it is born, pops his or her little
face up out of the water and let's mom take it from there. The baby
does not have the urge to breathe until the umbilical cord or the baby
itself is in air. The proven fact (in her practice anyway) is that
water makes birth easier and faster with much less trauma to either baby
or mom and greatly improves the baby's Apgar score.
My midwife also encourages waterbirths for breeches because the baby has
a longer period of time between bum and feet coming out and the head
being birthed. The baby makes no response to the water as s/he would
when coming in contact with air.