PhII Neo-Adjuvant Letrozole & Lapatinib in Pts w/HER2+ & Hormone Receptor+ Operable Breast CA SPORE

DISEASE CHARACTERISTICS: Inclusion Criteria: * Clinical stage I, II, or III operable invasive mammary carcinoma, confirmed by histological analysis * Measurable residual tumor at the primary site * Measurable disease is defined as any mass that can be reproducibly measured by physical examination, mammogram, and/or ultrasound and can be accurately measured in at least one dimension (longest diameter to be recorded) as 10 mm (1 cm) * Available core biopsies from the time of diagnosis * May include sections of paraffin-embedded material * Scheduled to undergo surgical treatment with either segmental resection or total mastectomy * Prior history of contralateral breast cancer allowed if patient has no evidence of recurrence of their initial primary breast cancer within the last 5 years * HER2-positive by Herceptest (3+) or FISH * ER-positive and/or PR-positive by IHC Exclusion Criteria: * Locally recurrent breast cancer * Evidence of distant metastatic disease (i.e., lung, liver, bone, or brain metastases) PATIENT CHARACTERISTICS: Inclusion Criteria: * Female * Postmenopausal, as defined by any of the following: * At least 55 years of age * Under 55 years of age and amenorrheic for at least 12 months OR follicle-stimulating hormone (FSH) values ≥ 40 IU/L and estradiol levels ≤ 20 IU/L * Prior bilateral oophorectomy or prior radiation castration with amenorrhea for at least 6 months * ECOG performance status 0-1 * ANC ≥ 1,000/mm³ * Platelet count ≥ 100,000/mm³ * Creatinine ≤ 1.5 times upper limit of normal (ULN) * Bilirubin ≤ 1.5 times ULN * AST and ALT ≤ 1.5 times ULN * Able to swallow and retain oral medication * Cardiac ejection fraction normal by echocardiogram (or MUGA scan if an echocardiogram cannot be performed or is inconclusive) Exclusion Criteria: * Premenopausal breast cancer, pregnant, or lactating * Serious medical illness, that in the judgment of the treating physician, places the patient at high risk of operative mortality * Malabsorption syndrome, disease significantly affecting gastrointestinal function, or resection of the stomach or small bowel * Ulcerative colitis * History of other malignancy * Patients who have been disease-free for 5 years, or patients with a history of completely resected non-melanoma skin cancer or successfully treated in situ carcinomas are eligible * Active or uncontrolled infection * Dementia, altered mental status, or any psychiatric condition that would prohibit the understanding or rendering of informed consent * Known history of uncontrolled or symptomatic angina, arrhythmias, or congestive heart failure PRIOR CONCURRENT THERAPY: Exclusion Criteria: * Prior chemotherapy for primary breast cancer * Tamoxifen or raloxifene as a preventive agent within the past 21 days * Hormone replacement therapy (e.g., conjugated estrogens tablets \[Premarin\]) within the past month * Prior therapy with anthracyclines * Investigational drug within the past 30 days or 5 half-lives, whichever is longer * Concurrent anti-cancer therapy (chemotherapy, radiation therapy, surgery, immunotherapy, hormonal therapy, or any other biologic therapy) other than letrozole * Concurrent treatment with an investigational agent