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Thank you for your post. Based on your question, there are many things at play. Your granddaughter may be taking out her relational difficulties with her husband out on the first born. In addition, the first born is "absorbing" this animosity and is translating this to her difficulties in her development. Has your granddaughter considered going to couple's therapy with the husband?
Before going any further, what are your expectations from this site? There is only so much you can do as the grandparent.
Brad, I thought your answer was right on target but just as you indicated in your response there is little a grandmother can do. I wanted my daughter to show your response to both my granddaughter and her husband but she would not. I wanted to forward yout answer to my granddaughter and her husband but my daughter does not want me to do this. So I have done all I can do and now I will just love them with all my heart.