Despite the fact that Mike told Tom that Fredo was weak and stupid, he still maintained him in a position of authority. As he stated to Tom: "I give you complete power over ... Fredo and his men". He could have jettisoned him at any time and, thus, not put him in a position to threaten the family at that time. Finally, he did exile him from his crime family and that ended his usefullness to any of Mike's enemies. But Mike was a murderer. He murdered and he presided over a group of people who murdered with no thought about its morality. So, fratricide may have been as natural an act to him as ordering a hit on anyone else.