Yeah it tells you that he was in shock and crying his eyes out.The cop on the family's payroll call Sonny and tells him to come get Fredo and sedate him. Thats where he is when everyone else is plotting agasinst Paulie,"he's sleeping"

The FBI then(and still today) cannot possibally know what the reasons are for whatthe mob is doing, so that probably accounts for some of it, but Fredo also might had been an Underboss. Not all UBs have the same amount of power,territory,etc. "I've always taken care of you." Maybe it was a title, but didnt have much power to go along with it.