RATIONALE: Midostaurin may stop the growth of cancer cells by blocking some of the enzymes needed for cell growth. Drugs used in chemotherapy, such as azacitidine, work in different ways to stop the growth of cancer cells, either by killing the cells or by stopping them from dividing. Midostaurin may help azacitidine kill more cancer cells by making the cancer cells more sensitive to the drug. PURPOSE: This phase I/II trial is studying the side effects and best dose of midostaurin when given together with azacitidine and to see how well it works in treating elderly patients with acute myelogenous leukemia.